Meta Analysis of Dividend Policy Affect on Share Price Volatility

Abstract

In Finance Literature, it is very controversial issue that whether dividend policy is significant and important decision or it is a residual decision, not affecting firm's performance at all. Researchers have contradict viewpoints in favor or against of dividend policy's importance in financial decisions. In this research work, it is tested whether dividend policy affects the share price of firms. If firm's share price changes with the change in dividend policy then dividend policy is an important financial decision and not a residual decision. In this study, analysis is done by using Meta Analysis, which involves collecting of previous studies’ result and then present the combined result of all studies together in quantitative form. So the purpose of this study is to present the combined result of previous studies on dividend policy and share price volatility by using Meta Analysis. Meta Analysis's summarized effect size (semi partial correlation) is-0.12595, which is significant @ 1% significance level. Result shows that dividend policy and share price volatility have negative and significant relationship. So increase in dividend payment may reduce the share price volatility or risk, that's why dividend policy is very important financial decision.