Year: 2018
Type: dissertation
Abstract: For many financial analysts the relationship between dividend policy and share price \nvolatility remains inconclusive. The purpose of this study was to ascertain whether \nthe relationship between dividend policy and share price volatility for JSE-listed firms \nin South Africa differs from previous, similar research done on different markets. The \nresearch study answered the research question and determined what the relationship \nis between dividend policy and share price volatility for a representative sample of \nJSE-listed firms. In addition, it met the objective of finding and evaluating the \nrelationship between dividend policy and share price volatility for a selection of JSElisted \nfirms, under various economic conditions. The research study spanned a 12- \nyear period with more than 1 065 observations noted. Quantitative, secondary data \nwas collected and descriptive statistics were used during the analysis phase. Two \nstandard multiple regression models were used to regress dividend policy and share \nprice volatility, with the first regression model only providing a crude test between the \nvariables. The second regression model accounted for factors that affect both \nvariables and was included to provide a more accurate test estimation. The \nrelationship between the dividend payout ratio and share price volatility and the \nrelationship between dividend yield and share price volatility were evaluated and \nreported on, under various different economic conditions (pre, during and post the \n2008 financial crisis). The study concluded that there is a negative correlation \nbetween a firm’s dividend policy and share price volatility. It further found that a firm’s \ndividend payout ratio, and not the dividend yield ratio, remains the single biggest \ncontributor in explaining the variance in share price volatility throughout the different \neconomic phases presented by pre, during and post the 2008 global financial crisis.
Author: Francois Cornelius Wehncke
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3101662412