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An Analysis of the Effect of Dividend Policy on Stock Price Volatility of Listed Companies on the Lusaka Securities Exchange

Author

Listed:
  • Kapundu, Karen Kapotwe

    (University of Zambia)

  • Mwange, Austin

    (University of Zambia)

Abstract

This study analyzed the effect of dividend policy on stock price volatility of firms listed on the Lusaka Securities Exchange, focusing on dividend yield, dividend payout ratio, and earnings per share as key determinants. Stock price volatility is a critical indicator of market stability, investor confidence, and financial decision-making, particularly in emerging markets where information asymmetry and economic uncertainty are prevalent. The study was guided by three objectives: to examine stock price volatility, analyze dividend policies, and evaluate their effect on volatility. A quantitative research approach was employed using secondary data from financial statements of 10 listed companies over a twenty-one-year period. Firms were sampled using a one-stage cluster sampling technique, and data were analyzed using descriptive statistics, correlation analysis, and fixed-effects panel regression models. Diagnostic tests for autocorrelation, heteroskedasticity, and normality ensured robustness and reliability. Findings indicate that stock price volatility is relatively high with frequent short-term fluctuations. Dividend yield was relatively stable, reflecting firms’ efforts to maintain consistent returns and signal financial stability, whereas dividend payout ratios and earnings per share exhibited significant variability, highlighting inconsistencies in profitability. Regression results revealed that dividend yield and payout ratio do not have statistically significant effects on stock price volatility. In contrast, earnings per share has a statistically significant negative effect, indicating that higher earnings are associated with more stable stock prices. The study concluded that investors rely more on earnings information than dividend indicators. Firms are encouraged to improve earnings stability and align dividend payouts with sustainable earnings, while policymakers should enhance transparency and timely financial reporting.

Suggested Citation

  • Kapundu, Karen Kapotwe & Mwange, Austin, 2026. "An Analysis of the Effect of Dividend Policy on Stock Price Volatility of Listed Companies on the Lusaka Securities Exchange," African Journal of Commercial Studies, African Journal of Commercial Studies, vol. 7(3).
    • Handle: RePEc:cwk:ajocsl:2026-033
    DOI: 10.59413/ajocs/v7.i3.62
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    References listed on IDEAS

    as
    1. Adekunle Orelope Koleosho & Ishola Rufus Akintoye & Ayodeji Temitope Ajibade, 2022. "The Effect of Dividend Policy on Share Price Volatility of Some Selected Companies on the Nigerian Exchange," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 15(1), pages 10-20.
    2. Omar Farooq & Harit Satt & Fatima Zahra Bendriouch & Diae Lamiri, 2021. "Dividend policy and the downside risk in stock prices: evidence from the MENA region," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 22(3/4), pages 261-278, September.
    3. Khaled Hussainey & Chijoke Oscar Mgbame & Aruoriwo M. Chijoke‐Mgbame, 2011. "Dividend policy and share price volatility: UK evidence," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 12(1), pages 57-68, January.
    4. James E. Walter, 1956. "Dividend Policies And Common Stock Prices," Journal of Finance, American Finance Association, vol. 11(1), pages 29-41, March.
    5. repec:wbk:wbpubs:40219 is not listed on IDEAS
    6. Khaled Hussainey & Chijoke Oscar Mgbame & Aruoriwo M. Chijoke-Mgbame, 2011. "Dividend policy and share price volatility: UK evidence," Journal of Risk Finance, Emerald Group Publishing, vol. 12(1), pages 57-68, January.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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