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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. Sanderson Abel & Muleya Henry & Tebogo Mokumako & Julius Mukarati & Pierre Le Roux, 2024. "Determinants of Share Prices of Agriculture Listed Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 106-110, July.
    2. 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.
    3. Tarek Eldomiaty & Nada Khaled, 2024. "Cryptocurrency volatility and Egyptian stock market indexes: A note," Modern Finance, Modern Finance Institute, vol. 2(1), pages 121-130.
    4. Adler Haymans Manurung & Nera Marinda Machdar & John Edward Harly Jacob FoEh & Jhonni Sinaga, 2024. "Dividend Policy as a Moderating of the Effect of Dividend Announcement on Stock Price in Indonesian Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 96-105, July.
    5. Oboh, John Ogenyi & Animpuye Canice & Odama Patrick Ojeka, 2024. "Stock Price and Firms Attributes of Listed Deposit Money Banks in Nigeria: The Intervening Role of Creative Accounting," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(7), pages 3336-3350, July.
    6. Limba, Franco & Rijoly, Jacobus Cliff Diky & Tarangi, Margreath, 2020. "Black Swan Global Market: Analysis of the Effect of the Covid-19 Death Rate on the Volatility of European Football Club Stock Prices (Case Study of Juventus F.C., Manchester United, Ajax Amsterdam and," MPRA Paper 120396, University Library of Munich, Germany.
    7. Claude Bergeron, 2024. "Inflation, risk, and dividend growth," SN Business & Economics, Springer, vol. 4(7), pages 1-21, July.
    8. 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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