Paper title: Nexus between Dividend Policy and Stock Price Volatility: Evidence from Dhaka Stock Exchange
Abstract: The study investigates whether dividend policy is a major predictor of stock price volatility for the firms listed on the Dhaka Stock Exchange excluding the financial institutions. The research has been conducted with the Dividend Payout Ratio serving as the explanatory variable and Earnings Volatility, Long-term Debt, Firm Size and Asset Growth serving as the control variables. Panel regression analysis has been used while conducting the analysis. The model with the ordinary standard error does not fit well, suggesting that the significant variable is long-term debt. However, after integrating time-fixed variables it is found that firm size is significantly linked with stock price volatility. In addition, the model with robust standard error and no time-fixed effect implies that dividend payout, earnings volatility and long-term debt are significant, whereas the model with time-fixed effect suggests that earnings volatility and firm size are significant. To account for endogeneity, lags are introduced in the model. Changes in the significance of explanatory and control variables are rarely noticeable with lags being introduced in the models. The output of the model with robust standard error and time-fixed effect is comparable to that of the model with no lag. Finally, tests are conducted to account for heteroscedasticity and time-fixed effect. The results of the tests indicate that the data is heteroscedastic, necessitating the use of temporal fixed effects in fixed effects panel regression. Some of the models incorporated robust standard error to correct for heteroscedasticity and a year dummy to account for the time-fixed effect. Keywords: Dividend policy, Volatility, Dividend yield DOI: https://www.doi.org/10.61607/JFB.V20N1-2.A7 Article Info: Submission Date: February 03, 2023; Acceptance Date: December 04, 2023.
