The impact of dividend payout ratio (DPR)‎ on stock price volatility : evidence from ASE

Abstract EN

Using 2000-2006 pooled and panel data, the current study examines the empirical relation between stock price movements and annual cash dividend payout ratio for publicly listed companies (PLCs) quoted in the Amman Stock Exchange (ASE).

The study finds that the DPR is not significantly related to share price volatility.

This may indicate that shareholders prefer capital gains on shares over annual cash dividends due to the imposition of tax liability on dividends.

In contrast, the study shows that Firm-specific variables, particularly the firm size, investment opportunities and debts are likely to be more important than annual cash dividends in the valuation of stock price, in investor’s point of view.

Additionally, the study concludes that the stock prices of the firms in the financial sectors are more volatile than their counterparties in the service and industrial sectors.

This may attributes to differences amongst industries in terms of market conditions, cost structures and regulatory restrictions.