Dividend Policy

Articles:

1. The Effect of Asymmetric Information on Dividend Policy

2. Dividend Policy and Stock Price Volatility: Evidence from Bangladesh

The reason select this article:

To know about the relationship between dividend policy and stock price volatility in Bangladesh.

Components of Comparison	Article from CRP	Article from Student
Title	The Effect of Asymmetric Information on Dividend Policy	Dividend Policy and Stock Price Volatility: Evidence from Bangladesh
Topic	Dividend Policy	Dividend Policy
Theory used by article	Pecking Order Theory Signaling Theory	Modigliani and Miller Theory
Hypothesis of research	Pecking Order Theory The higher the analyst folowing, the higher the dividends Signaling Theory The higher the analyst following, the lower the dividends	There is no significant difference in stock price during the ex and post announcement of earnings in the form of dividend and that inter-industry variation will have no impact on stock prices.
Variables used in research	Dependent Variable: Dividend Yield Independent Variable: Insider ownership Analyst following Growth opportunities Cash flow Dummy	Price Volatility (P-Vol) Dividend Yield (D-YIELD) Earnings Volatility (E-VOL) Payout Ratio (P-OUT) Long Term Debt (DEBT) Firm Size (SIZE) Growth in Assets (GROWTH)
Method of analysis	Tobit Model	Cross-sectional regression analysis
Result of the analysis	Empirical Result: Dividends are positively related to both analyst following and cash flow, but negatively related to growth opportunities. A higher analyst following implies less asymmetric information. The positive relation between dividends and analyst following is consistent with the pecking order theory and inconsistent with the signaling theory. The positive relation between dividend and cash flow and the negative relation between dividend and growth opportunity are consistent with the pecking order theory. Dividends are unrelated to the insider ownership variable when the level of asymmetric information is explicitly controlled.	Table 1. The stock prices follow a normal distribution. Table 2. Dividend Yield, D and GROWTH are is positive, but none of these are significant. The coefficients Earning Volatility, Payout and Size are negative; however, only Payout and Size are significant. Or there is a positive, but non-significant relationship between dividend and stock price. Table 3. There is a significant negative correlation between payout and price volatility implying that lower payout influence the price; significant negative correlation between earnings volatility and payout implying that companies with volatile earnings pay less; significant negative correlation between payout and debt implying that firms with higher level of debt pay less, as the firm may have other commitment, such as interest payment; significant positive relationship between dividend yield and size implying that larger firms have the ability and pay higher dividends; significant positive correlation between the payout and growth implying that firms with high growth make larger payout. Or the relationship between dividend policy and price volatility is due to broad industry patterns rather than individual differences among firms Table 4. The Dividend Yield, Debt and Growth are is positive, but none of these are significant. The coefficients Earning Volatility, Payout and Size are negative; however, only Payout and Size are significant. Or some of the industries have significant influence on dividend policy and stock price volatility in Bangladesh. Conclusion: There is no material impact on stock price during the ex and post announcement of earnings in the form of dividend and that inter-industry variation will have little impact on stock prices. The managers may not employ the dividend policy to influence their stock’s risk. The influence of stock price risk through dividend may be also ambiguous due to the inefficient capital market in Bangladesh.