Dividend policy and share price volatility: UK evidence

Hussainey, Khaled and Mgbame, C O and Chijoke-Mgbame, A M (2011) Dividend policy and share price volatility: UK evidence. Journal of Risk Finance, 12 (1). pp. 57-68.

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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.

Item Type: Article
Article Type: Article
Uncontrolled Keywords: United Kingdom, Dividends, Business policy, Share prices
Subjects: H Social Sciences > HG Finance
H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation
Divisions: Faculty of Business, Computing and Applied Sciences > Business School > Accounting and Finance
Research Priority Areas: Applied Business Research
Depositing User: Ineke Tijsma
Date Deposited: 31 Mar 2015 13:25
Last Modified: 22 Oct 2015 15:48
URI: http://eprints.glos.ac.uk/id/eprint/1561

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