Dividend policy effect on common stock price volatility: An empirical evidence from indian companies

Abstract

Despite empirical research, the relationship between dividend policy and stock price volatility is continuously debatable. This study investigated the relationship between dividend policy and stock price volatility of Indian listed companies. The study examined 260 listed companies based on the reliable dividend-paying manners of nonfinancial companies listed on the Bombay Stock Exchange (BSE) for the financial period from 2014–2015 to 2020–2015. To analyze the data, this study used the panel data models: fixed effects, random effects, and the Hausman test. Finally, this study applied the fixed effect model after careful examination of multicollinearity, endogeneity, and causality issues related to the dataset. The analyses revealed a significant negative relationship between dividend payout and stock price volatility meanwhile, dividend yield and stock price volatility have a positive association. The study outcomes provide information for investors and managers about dividend decision. This study provides an extensive understanding of the emerging stock market fluctuation on the relationship with the dividend policy.