The Impact of Dividend Policy on Stock Price Volatility: A Study on Listed Financial Companies of DSE in Bangladesh
Md. Zakir Hosain*
K. M. Zahidul Islam**
Abstract: The study attempted to examine the impact of dividend policy (dividend yield and dividend payout ratio) on stock price volatility in the listed financial companies of Dhaka Stock Exchange (DSE) in Bangladesh by using 24 companies from two major categories (Bank and Financial Institutions) over 10 years from 2008 to 2017. Along with dividend yield and dividend payout ratio, the study considers four control variables to identify the impacts on stock price volatility. The collected panel data has been processed using multiple research techniques including descriptive analysis, pair-wise correlation analysis, relevant diagnostic tests, pooled ordinary least square, fixed effect method, and random effect method, to make the linkage among the variables. A robust standard error has been calculated to upgrade the efficiency of the models. The results suggest that dividend yield (DY) is significantly and positively associated with the stock price volatility whereas dividend payout ratio (DPR) is significantly and negatively associated with the stock price volatility. The study is important to helping investors, policymakers, and managers of the companies to appropriately address the issue of stock price volatility. Some policy guidelines are suggested to the financial companies based on the findings of the study.
Key words: Dividend Policy, Stock Price Volatility, Panel Data, Financial Companies, Bangladesh
* Assistant Professor of Finance, Bangladesh University of Business and Technology (BUBT), Rupnagar, Mirpur-02, Dhaka-1216, Bangladesh, Email: firstname.lastname@example.org
** Professor, Institute of Business Administration, Jahangirnagar University, Savar, Dhaka-1342, Bangladesh, E-mail: email@example.com