Dividend policy and stock price volatility in an emerging market: Does ownership structure matter?

Thi Kieu Hoa Phan,Nam Hoai Tran,Lanouar Charfeddine

doi:10.1080/23322039.2019.1637051

Abstract

This paper examines the impacts of dividend policy and ownership structure on stock price volatility in the Vietnamese market. The study also tests for the moderating effect of foreign/state owners...

Highlights

Stock price volatility means a change in stock prices over time
The current paper explores the influence of dividend policy and ownership structure on stock price movement, controlling well-established determinants as regarded in the literature
The impact of dividend policy and ownership structure on price variation has not been jointly examined in the context of emerging markets

Summary

Introduction

Stock price volatility means a change in stock prices over time. It is a consequence of instability, unpredictability, and risks. This research contributes to and consolidates the empirical evidence related to dividend policy, ownership structure and stock price volatility in transitional, emerging markets like Vietnam. The research by Allen and Rachim (1996) on the impact of dividend policy on stock price movement at the Australian Securities Exchange (ASX) suggest that stock price volatility is significantly, negatively related to dividend payout ratio. Gunaratne, Priyadarshanie, and Samarakoon (2016) explain that, at this stock market, while share price volatility is negatively related to dividend yield in the present year, the payout ratio in both present and prior years is positively linked to stock price fluctuation. Li, Nguyen, Pham, and Wei (2011) research into another aspect and find that the level of foreign investors’ equity holding reduces the volatility of corporate dividends in emerging markets This evidence relates to the strategic and long-term ownership of foreign investors. This research focusing on the post-crisis period and surveying the whole equity market of Vietnam is expected to shed light on the interesting phenomenon of transitional, emerging markets

Data and methodology

Findings

Conclusion