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Dividend policy and share price volatility: UK evidence

Khaled Hussainey (Accounting and Finance Division, Stirling Management School, Stirling University, Stirling, UK)
Chijoke Oscar Mgbame (Department of Accounting, Faculty of Management Sciences, University of Benin, Benin, Nigeria)
Aruoriwo M. Chijoke‐Mgbame (Accounting and Finance Division, Stirling Management School, Stirling University, Stirling, UK)

Journal of Risk Finance

ISSN: 1526-5943

Article publication date: 4 January 2011

22110

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.

Keywords

Citation

Hussainey, K., Oscar Mgbame, C. and Chijoke‐Mgbame, A.M. (2011), "Dividend policy and share price volatility: UK evidence", Journal of Risk Finance, Vol. 12 No. 1, pp. 57-68. https://doi.org/10.1108/15265941111100076

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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