The relationship between dividends policy and stock price volatility – Evidence from Chinese listed companies

Abstract

This study is going to test the impact of dividend policy on share price volatility and it uses non-financial companies listed in Chinese stock market as sample. At the end, 363 companies from all listed companies in Chinese capital market are selected and the data is from 2013 to 2016. The paper takes dividend payout ratio as the proxy for dividend policy to test the relationship between dividend policy and share price volatility by applying multiple regression. The study used the regression model developed by Lashgari and Ahmadi (2014), which adds control variables of firm size, earning volatility, leverage, and growth rate to the model. The results show significant positive relationship between share price volatility with dividend payout ratio. Moreover, among control variables firm size has the most obvious impact on share price volatility with a negative relationship, while neither of the relations between the leverage and price volatility, earnings volatility and price volatility are significant.