DIVIDEND POLICY AND ITS IMPACT ON STOCK PRICE VOLATILITY: A STUDY OF CEMENT SECTOR OF PAKISTAN

Abstract

Purpose To examine the relationship between dividend policy and stock price volatility in cement sector of Pakistan. Design/methodology/approach - Multiple regression analysis has been used to explore the relationship between price volatility and both dividend policy and payout ratio before and after using control variables (debt ratio, asset growth, earning volatility and size). For this study 16 cement companies have been studied out of 19 cement sector companies listed at KSE for the period of 2009-2013. Findings - A positive relationship is found between price volatility and dividend, and a negative relationship between price volatility and payout ratio. It was also found that leverage and price volatility are positively significant to each other while, size and price volatility are negatively significant. Practical implications - The study suggest that dividend policy is important in determining the stock price volatility in cement sector of Pakistan, hence is helpful to both managers and investors.