The impact of dividend policy on stock price volatility based on "bird-in-hand" theory: evidence from Malaysia
There is an unending debate about the relationship between dividend policy and stock price volatility in the capital market literature. As the result is still inconclusive, there is a good scope to investigate the issue further, especially in the emerging and less efficient markets, as they are stil...
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| Format: | Thesis |
| Language: | eng eng eng |
| Published: |
2019
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| Online Access: | https://etd.uum.edu.my/8547/1/depositpermission_s900282.pdf https://etd.uum.edu.my/8547/2/s900282_01.pdf https://etd.uum.edu.my/8547/3/s900282_references.docx |
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| Summary: | There is an unending debate about the relationship between dividend policy and stock price volatility in the capital market literature. As the result is still inconclusive, there is a good scope to investigate the issue further, especially in the emerging and less efficient markets, as they are still highly volatile in nature. Bursa Malaysia, the exclusive capital market platform of Malaysia, is considered to be one of the highly volatile emerging markets. Over the past few years, Bursa Malaysia has been observed surviving from several financial crises and other economic issues. Therefore, the objective of this study is to examine the relationship between dividend policy and stock price volatility, with the moderating role of “Bird-in-Hand” theory based on Bursa Malaysia. This study utilized two measurements for stock price volatility, namely Parkinson formula and Generalized Autoregressive Conditional Heteroskedasticity (GARCH). The cost of capital and rate of return were adopted in measuring the moderating effects of “Bird-in-Hand” theory. This study utilized the panel data regression models for data analysis on the sample of 548 non-financial listed companies in Bursa Malaysia from the year 2009 to 2016. This study found significant effects of dividend payout ratio and dividend yield on stock price volatility, when volatility was measured by both GARCH and Parkinson formula methods. Moreover, this study found significant moderating effects of cost of capital on the relationship between dividend payout ratio and stock price volatility, when volatility was measured using the Parkinson formula. However, the results were insignificant using the GARCH method. The study concluded dividend policy as a strong predictor of stock price volatility. The implications of this research are expected to enable investors, policy makers, and researchers to reduce the stock price volatility in Bursa Malaysia. |
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