Is the effect of dividend policy on the volatility of stock prices stable? An empirical study on European countries

ABSTRACT We scrutinise the impact of dividend policy on stock price volatility by examining the relationship between volatility and three dividend policy indicators, dividend yield, dividend payout, and stock repurchases, for 1,221 firms in eleven developed and emerging countries in Europe during the 2003–2017 period. We employ fixed-effects panel data analysis and we check for possible effects of the 2008–2009 global financial crisis on the relationship under investigation. Our results reveal an inverse relationship in a comprehensive and comparative setting. The results are robust for sub-groups of countries, i.e., developed and emerging, and sub-sample periods, i.e., pre- (2003–2007) and post- (2010–2017) crisis.