DETERMINANTS OF STOCK PRICE VOLATILITY IN PAKISTAN STOCK EXCHANGE: THE MEDIATING ROLE OF CORPORATE DIVIDEND POLICY (BANKING SECTOR)

Abstract

Purpose The purpose of this study to identify the determinants of stock price volatility and the role of dividend policy in it. The objective is to study the major reasons of price volatility and suggest some ways to control it. Methodology & Design This study is based on secondary data and the research has been conducted on the commercial banking sector in Pakistan Stock Exchange where the data of five years is being taken for testing purpose. The data was gathered from banks’ yearly Financial Statements, Reports and through internet. Findings The Results of the testing shows that dividend payments have significant impact on Price volatility. On the other hand Asset Growth and Leverage and Size have very least impact on Price Volatility. Limitations The study is based on Commercial banking sectors listed in Pakistan Stock Exchange, but upcoming studies should focus on other sectors of the country or in other exchanges for better understanding of different areas. Recommendations The results show that Dividend payments have significant impact on Price volatility and other variables have minor impact on price volatility. Banks need to announce their information about dividends payments dates at the start of year through statements or websites and secondly banks should strive to maintain their growth in assets on yearly basis. Besides, banks also need to maintain a balanced proportion of debt and the size of the firm to avoid price fluctuations.