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Dividend policy and share price volatility: UK evidence

Author

Listed:
  • Khaled Hussainey
  • Chijoke Oscar Mgbame
  • Aruoriwo M. Chijoke‐Mgbame

Abstract

Purpose - The purpose of this paper is to examine the relation between dividend policy and share price changes in the UK stock market. Design/methodology/approach - Multiple regression analyses are used to explore the association between share price changes and both dividend yield and dividend payout ratio. Findings - A positive relation is found between dividend yield and stock price changes, and a negative relation between dividend payout ratio and stock price changes. In addition, it is shown that a firm's growth rate, debt level, size and earnings explain stock price changes. Practical implications - The paper supports the fact that dividend policy is relevant in determining share price changes for a sample of firms listed in the London Stock Exchange. Originality/value - To the best of the authors' knowledge, this paper is the first to show that corporate dividend policy is a key driver of stock price changes in the UK.

Suggested Citation

  • 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.
    • Handle: RePEc:eme:jrfpps:15265941111100076
    DOI: 10.1108/15265941111100076
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    Citations

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    Cited by:

    1. Richard Oduro, 2024. "Impact of recapitalisation and dividend payout policies on financial sustainability of rural and community banks in Ghana," Future Business Journal, Springer, vol. 10(1), pages 1-18, December.
    2. Nor Anis Shafai & Annuar Md. Nassir & Fakarudin Kamarudin & Norhuda Abdul Rahim & Nor Hayati Ahmad, 2019. "Dynamic Panel Model of Dividend Policies: Malaysian Perspective," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(3), September.

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