| dc.description.abstract | The objective of this paper is to determine the impact of dividend policy on stock price risk at the NSE. A sample of 40 continuously listed companies was examined for the period 2004 to 2008. The empirical estimation was based on a cross-sectional regression analysis of the relationship between stock price volatility and dividend policy after controlling for firm size, earning volatility, leverage and asset growth. Both dividend policy measures (l.e. dividend yield and payout ratio) were found not to have significant impact on the share price volatility at NSE for the period 2004 to 2008. The relationship is not much improved even after controlling for the above mentioned factors. This suggests that dividend policy do not affect stock price volatility at the NSE. A stepwise regression analysis was also performed on the dividend policy variables and the control variables with firm size and earnings volatility being identified as the only statistically significant variables explaining stock price volatility at the NSE. A regression analysis across the five sectors of NSE (Agricultural, Commercial and Service, Financial, Industrial and Allied and Alternative segment) to investigate effects of dividend policy across sectors yielded the same results. Earnings volatility and size of the firm were the only two variables in the model found to significantly explain stock price movements at the NSE within the study period across three sectors of the five l.e Commercial and services, Financial Services, and Industrial and Allied sectors. The model explained 14 per cent of stock price volatility at the NSE between 2004 and 2008, which is statistically significant at 5% level of significance (F=6.215, p-value=0.000<0.05). A regression analysis of stock Price Volatility, Dividend Yield and Payout Ratio alone shows that the regression model is not statistically significant (F=0.957, p-value=0.386) and the model explains 0% of Price Volatility. Although the results are not robust enough as in the case of developed markets they are consistent with the behavior of emerging markets | en_US |
