Abstract:
Explaining dividend policy has been one of the most difficult challenges facing financial economists. Despite decades of study, we have yet to completely understand the factors that influence dividend policy and the manner in which these factors interact.The aim of this paper is to examine the relation between dividend policy and share price volatility in Tehran Stock Exchange (TSE). The analyses are performed using data derived from the financial statements of 100 firms listed on the Tehran Stock Exchange during a six-year period from 2006 to 2011. Multiple regression analyses are used to discover the association between share price changes and both dividend yield and dividend payout ratio. The empirical findings suggest that there is a significant negative relationship between the dividend policy of a firm and the volatility of its stock price. In addition, it is shown that a firm’s growth rate, debt, size and earnings explain stock price changes. The study found that dividend policy is relevant in determining share price changes for a sample of firms listed in Tehran Stock Exchange.
Machine summary:
"For this purpose, a sample of 84 companies from 142 consumer product companies listed in main market of Bursa Malaysia were selected and the relationship between share price volatility with two main measurements of dividend policy, dividend yield and payout ,were examined by applying multiple regression for a period of six years from 2005 to 2010.
This study also seeks to examine the effect of dividend policy considering dividend yield and payout as independent variables, on the stock price volatility in emerging markets by taking Iran as a case and by taking the data of firms listed in Tehran Stock Exchange (TSE) for examination.
In line with the recommendations by Baskin (1989) and Hussainey et al (2011), a number of control variables were included to account for certain factors that affect both dividend policy and stock price volatility – asset growth, leverage, earnings volatility and firm size.
Descriptive Analysis (به تصویر صفحه مراجعه شود) Notes: Price volatility = the annual range of stock prices divided by the average of the high and low prices obtained in the year, raised to the second power; dividend yield = dividend per share divided by price per share; dividend payout = dividend per share divided by earnings per share; size = number of ordinary shares multiplied by price per share; earnings volatility = SD of earnings from the overall average; debt = ratio of long-term debt to total assets; growth = ratio of change in total assets at the end of the year to the level of total assets at the start of the year Table 2 shows the correlation matrix of variables utilized for the study."