Dividend Policy Revisited in an Emerging Market

Abstract

This study examines the impact of dividend policy on the share price volatility for 376 non-financial firms listed on Bursa Malaysia from 2003 to 2021. Conforming to the dividend relevance theory, the study’s empirical findings suggest that greater dividend yield and dividend payout shall lower share price volatility, encouraging investors to invest in high-dividend paying firms with certain returns in the future. Further examination reveals that the chosen control variables produce predicted results and sit alongside earlier Malaysian studies. These include both earnings volatility and leverage are positively associated with share price volatility, while firm size demonstrates a significant negative association with share price volatility. The present study finds that asset growth does not influence share price volatility. The practical implication of the presented findings suggests a dividend smoothing behaviour by Malaysian firms during COVID-19 and dividend stocks are more favoured by the investors.