The effect of dividend policy on stock price volatility: Empirical evidence from Amman Stock Exchange

Ahmad, M.A.M.; Alrjoub, A.M.S.; Alrabba, H.M.; Ahmad, M.A.M; Alrjoub, A.M.S; Alrabba, H.M

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The effect of dividend policy on stock price volatility: Empirical evidence from Amman Stock Exchange

Ahmad, M.A.M.; Alrjoub, A.M.S.; Alrabba, H.M.

Academy of Accounting and Financial Studies Journal 22(2)

2018

ISSN/ISBN: 1096-3685

Accession: 103809909

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Summary

This paper aims to examine the effect of dividend policy on the stock price volatility of firms listed in the Amman Stock Exchange. The data applied for the study consist of 228 firms listed on the Amman Stock Exchange from the period 2010 to 2016 which makes up 1596 firm-year observations. Descriptive statistics, Pearson correlation and panel GMM estimation was applied to test the relationship. The findings show that both main variables of dividend policy-dividend yield and dividend payout have negative significant relationship with stock price volatility. This implies that the higher the dividend yield and dividend payout of the firms, the lower the stock price volatility which lead to more stability of the stock price. It is suggested that firms in the Amman Stock Exchange should maintain dividend policy that fit in to the existing and prospecting investors.