Impact of Dividend Policy on Stock Price Volatility: An Empirical Study on Financial Service Industry of Bangladesh

Abstract

The impact of dividend policy on stock price volatility is one of the most researched topics of corporate finance. This study investigates the relationship between stock price volatility and dividend policy among Bangladeshi financial service industry companies. Two key variables - dividend yield and dividend payout have been taken as the independent variables after controlling for firm size, asset growth, earnings volatility, long-term debt, and earnings per share. The stock price volatility has been taken as the dependent variable. Panel regression analysis is employed to explore the relationship of dependent with independent variables. Results reveal a significant positive relationship between stock price volatility and dividend yield among companies considered in this study. This study will help regulators and investors understand how the stock price fluctuates in response to financial information such as dividend announcements.