Dividend policy and share price volatility: UK evidence
Abstract
Purpose
The purpose of this paper is to examine the relation between dividend policy and share price changes in the UK stock market.
Design/methodology/approach
Multiple regression analyses are used to explore the association between share price changes and both dividend yield and dividend payout ratio.
Findings
A positive relation is found between dividend yield and stock price changes, and a negative relation between dividend payout ratio and stock price changes. In addition, it is shown that a firm's growth rate, debt level, size and earnings explain stock price changes.
Practical implications
The paper supports the fact that dividend policy is relevant in determining share price changes for a sample of firms listed in the London Stock Exchange.
Originality/value
To the best of the authors' knowledge, this paper is the first to show that corporate dividend policy is a key driver of stock price changes in the UK.
Keywords
Citation
Hussainey, K., Oscar Mgbame, C. and Chijoke‐Mgbame, A.M. (2011), "Dividend policy and share price volatility: UK evidence", Journal of Risk Finance, Vol. 12 No. 1, pp. 57-68. https://doi.org/10.1108/15265941111100076
Publisher
:Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited