The effects of Dividend Policy on Share Price Volatility: Evidence from Selected Emerging Capital Markets
DOI:
https://doi.org/10.59645/abr.v18i1.742Keywords:
Dividend Policy, Share Price Volatility, Emerging Markets, Dividend Yield, Payout Ratio, Earnings Volatility.Abstract
This study examined the impact of dividend policy on share price volatility in selected emerging capital markets, with particular emphasis on the roles of dividend payout ratio, dividend yield, and earnings volatility. Using balanced panel data from 160 listed firms across five emerging capital markets (Tanzania, Kenya, Nigeria, India, and Pakistan) over the period of 2018 to 2024, the study employed fixed and random effects regression models to analyze the relationship between dividend policy decisions and stock price fluctuations. Descriptive and correlation analyses revealed substantial variation in dividend behaviour, earnings stability, and firm characteristics across markets. The regression results showed that both dividend payout ratio and dividend yield had negative and statistically significant effects on share price volatility, indicating that firms with more stable or generous dividend policies experienced lower price fluctuations. In contrast, earnings volatility exerted a strong positive influence on share price volatility, highlighting earnings instability as a major source of market risk in emerging economies. These findings provided empirical support for signaling, bird-in-hand, and agency theories under conditions of market imperfection. By offering post-2020, multi-country panel evidence focused explicitly on volatility outcomes, the study contributed to the emerging-market finance literature by demonstrating that dividend policy plays a conditional but meaningful stabilizing role in less efficient capital markets.
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