Dividend policy and share price volatility - Evidence from industrial companies in Vietnam

Abstract

This study investigates the relationship between share price volatility and two key features of dividend policy, dividend yield and payout ratio in an emerging country – Vietnam by applying correlation analysis and linear regressions based on Ordinary Least Square model and robust model. The sample of the research included 67 industrial companies, which are listed publicly on the Ho Chi Minh Stock Exchange in the 5-year period, starting from 2015 to 2019. The originally regression model was added with some control variables like size, debt, growth and earning volatility. The empirical outcomes show two key features of dividend policy, dividend yield and dividend payout ratio, and share price volatility significantly neagatively. Moreover, a positive correlation between share price volatility and earning volatility and is found. This means that the more fluctuation in earning of the company, the more fluctuation in share price would be. Growth, size and debt are three factors that inconsiderably impact the changes in firm’s share prices.