Stock Price Volatility and Role of Dividend Policy: Empirical Evidence from Pakistan

Syed Akif Shah and Umara Noreen
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Syed Akif Shah: Department of Management Sciences, COMSATS Institute of Information Technology, Attock Campus, Islamabad, Pakistan
Umara Noreen: Department of Finance, Prince Sultan University, Women Campus, Riyadh, Kingdom of Saudi Arabia

International Journal of Economics and Financial Issues, 2016, vol. 6, issue 2, 461-472

Abstract: Despite years of empirical research, the linkage between dividend policy and stock price volatility (SPV) remains controversial among the researchers and scholars. This research endeavors to figure out the relationship between SPV and dividend policy of listed companies in Pakistan. A sample of 50 firms, based upon consistent dividend paying behavior, listed on Karachi Stock Exchange (KSE) has been selected from non-financial sectors, for the period of 2005-2012. Multiple regressions analyses have been carried on by applying random effect model on panel data i.e., for empirical estimation and robustness, panel estimated generalized least squares methods is used for finding relationship between dividend policy (dividend payout [DP] and dividend yield [DY]) and SPV after controlling for firm size (FS), asset growth (AG), long-term debt (LD), earning volatility (EV) and earnings per share (EPS). The study has found significant negative relationship between SPV and dividend policy variables i.e., DP and DY. Study has also found significant positive relationship between control variables (AG, EV and EPS) and SPV in KSE. But in case of the remaining two control variables i.e., FS and LD, these were found to be negatively related to SPV. The findings of this research are expected to contribute to dividend policy literature by providing evidence from Pakistani stock market to prior studies done in developed and developing countries

Keywords: Stock Price Volatility; Dividend Policy; Karachi Stock Exchange; Random Effect Model (search for similar items in EconPapers)
JEL-codes: G20 G30 G35 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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