Global Academy of Training and Research Journal

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DOI 10.35609/jfbr.2017.2.2(6)

Reference to this paper should be made as follows: Pirzada, K. (2017). Effects of Dividend Policy on Stock Price Volatility in the Financial Sector, J. Fin. Bank. Review, 2 (2): 34. https://doi.org/10.35609/jfbr.2017.2.2(6)

Received: November 25, 2016 | Accepted: May 12, 2017

Effects of Dividend Policy on Stock Price Volatility in the Financial Sector
Kashan Pirzada
Faculty of Business and Accountancy, University of Malaya, Malaysia Abstract

Objective - This research seeks to identify the relationship between dividend policy and share price volatility.

Methodology/Technique - This study uses both regression and correlation analysis, with price volatility, dividend yield, and dividend pay-out ratio as control factors. The study focuses on Malaysian companies for the period between 2001 and 2009.

Findings - This research identifies that there is a positive, but not significant, relationship between share price volatility and dividend yield.

Novelty - An important implication of this research is that the share price reaction to the earnings announcement is not similar to that of other developed countries. Therefore, the managers may not employ the dividend policy to influence their stock's risk. The influence of stock price risk through dividends may also be ambiguous due to the inefficient capital market in the financial sector.

Type of Paper: Empirical

Keywords: Dividend Policy; Stock Price; Corporate Finance; Financial Sector.

JEL Classification: G11, L25.

Price: USD 25