Description
Assessing the Relationship Between Dividend Policy and Stock Price Volatility: A Mixed-Methods Approach
Abstract
The relationship between the stock price volatility and the company’s dividend policy is a controversial debate between many scholars and researchers. The dividend policy determines the strategy of the organizations in distributing their profits to their stakeholders. However, stock price volatility determines the change in the price value of stock according to the time. For instance, primary elements of the dividend policy are the payout ratio and dividend yield. Investors particularly monitor the payout ratio and dividend yield to understand the risks that impact their stock price. The objective of this study is to explain the influence of the company’s dividend income on the stock price by using a mixed-method approach.
Stock price volatility is always a serious challenge for investors and business experts, which greatly impacts the value of investments. Furthermore, investors utilize the payout and dividend yield ratios to examine stock value and risks. The chances of a stock price increase or decrease depend on the dividend income of the company after the declaration. The study applies mixed method approach to evaluate the relation between stock price and dividend policy. The quantitative research uses the company’s historical data regarding the yield and payout ratio. The qualitative analysis investigates the opinions of industry experts and trade professionals to explain the relationship accurately.
The study explains that stock price volatility occurs when the company declares the dividend amount in the market. The chances of facing stock price volatility decrease if the dividend value of the company remains stable after declaration. At the same time, stock price fluctuations occur if the dividend value is uncertain. The organization causes stock price volatility if it retains its total earnings without declaring dividends. In summary, researchers have explained that stock price volatility also occurs due to inflation and trade exchange as well.
Read more about the topic
Dividend policy and stock price volatility in Indian capital market
Dividend policy and share price volatility: Evidence from Malaysia
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