ISSN: 2225-8329
Open access
The aim of this paper is to investigate the influence of the dividend policy on the share price volatility for the Jordanian industrial firms. All the 77 Jordanian industrial firms listed at Amman Stock Exchange for twelve years from 2000 to 2011 have been selected. Descriptive analysis, correlation analysis and a cross-sectional time series multiple least square regression method have been used to present data analysis, test hypotheses, and achieve the objective of the study. The experiential results showed significant negative effect of the two components of the dividend policy D_Y and D_P, on the share price volatility, indicating that as the Jordanian industrial firms increase their dividend yield and/or dividend payout, the stock prices tend to stability, as the price volatility fall, and thus, the share price risks fall. Moreover, the results conclude that the dividend policy has an impact on the price volatility, and that the managers of the Jordanian industrial firms have the ability to affect their firm's share price by adapting dividend policy that suits their target investors. Moreover, the study suggests that duration effect theory and signaling theory are relevant in determining the share price volatility in the Jordanian equity market.
Allen, D. E., and Rachim, V. S. (1996) “Dividend policy and stock price volatility: Australian Evidence”, Journal of Applied Economics, Vol. 6 pp. 175-188.
Al-Malkawi, H. N. (2007), Determinants of corporate dividend policy in Jordan: an application of the Tobit model, Journal of Applied Accounting Research, Vol. 23, pp. 44-70.
Baskin, J. (1989), Dividend policy and the volatility of common stock, Journal of Portfolio Management, Vol. 15, pp. 19-25.
Battacharya, S. (1979), Imperfect information & dividend policy and the ‘bird in hand’ fallacy, The Bell Journal of Economics, Vol. 10, pp. 259-70.
Black, F. (1976), “The dividend puzzle”, Journal of Portfolio Management, Vol. 2, pp. 5-8.
Cynthia, A. U. (2012). Company Disclosure In Indonesia: Corporate Governance Practice, Ownership Structure, Competition And Total Assets, Asian Journal of Business and Accounting, 5(1), 75-108.
Gordon, M. J. (1959), Dividend, Earnings and Stock Prices, Review of Economics and Statistics, 11, May, pp 99-105
Gordon, M. J., and Shapiro, E. (1956), Capital equipment analysis: the required rate of profit, Management Science, Vol. 3, pp. 102-10.
Hashemijoo, M., Aref, M. A., and Nejat, Y. M. (2012), “The Impact of Dividend Policy on Share Price Volatility in the Malaysian Stock Market , Journal of Business Studies Quarterly, Vol. 4, No. 1, pp. 111-129.
Hussainey, K., Mgbame, C. O., & Chijoke-Mgbame, A. M. (2011). Dividend Policy and Share Price Volatility: UK Evidence. Journal of Risk Finance, 12 (1), 57 - 68.
Jecheche, P. (2012), Dividend policy and stock price volatility: a case of the Zimbabwe stock exchange. Journal of Finance & Accountancy; Vol.10, 1-13, available at: http://connection.ebscohost.com/ c/articles/78392038/dividend-policy-stock-price-volatility-case-zimbabwe-stock-exchange.
Kleinbaum, D. G., Kupper, L. L., Muller, K. E., and Nizam, A. (1998), Applied Regression Analysis and Other Multivariate Methods, 3rd Edition, Duxbury Press, Pacific Grove.
Miller, M. H., and Modigliani, F. (1961), Dividend policy, growth and the valuation of shares, The Journal of Business, Vol. 34, pp. 411-33.
Muhammad A., Syed, Z. S., Kashif, H., Muhammad, T. (2011), “Impact of Dividend Policy on Stock Price Risk: Empirical Evidence from Equity Market of Pakistan,” Far East Journal of Psychology and Business Vol. 4, No 1 . pp. 45-52.
Okafor, C. A., Mgbame, C.O., and Chijoke-Mgbame A. M. (2011), “Dividend Policy and Share Price Volatility in Nigeria,” Journal of Research in National Development (9)1 pp 202-210, available at: www.ajol.info/journals/jorind.
Omar, B., Simon, J. (2011). Corporate aggregate disclosure practices in Jordan, Advances in Accounting, incorporating Advances in International Accounting 27, 166-186.
Pandey, I. M. (2004) Financial Management 9th Edition, New Delhi: Vikas Publishing House.
Parkinson, M. (1980), “The extreme value method for estimating the variance of the rate of return”, Journal of Business, Vol. 53, pp. 61-65.
Petit, R. R. (1972). “dividend announcements, security performance, and capital market efficiency”, Journal of Finance, Vol. 27, pp. 993-1007.
Ross, S. (1977), The Determinant of Financial Structures: The Incentive Signaling Approach, The Bell Journal of Economics, 8 (1): 23-40.
In-Text Citation: (Ramadan, 2013)
To Cite this Article: Ramadan, I. Z. (2013). Dividend Policy and Price Volatility. Empirical Evidence from Jordan. International Journal of Academic Research in Accounting Finance and Management Sciences, 3(2), 15–25.
Copyright: © 2021 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode