Dividend Policy and Stock Price Volatility in the Bangladesh Capital Market: An Experimental Analysis

Abstract

Commercial organizations in Bangladesh are experiencing rivalry among them because of economic struggle globally and attempting to remain competitive in these changeable economic surroundings. This paper intends to analyze the impact of dividend policy on the market price of stock in Bangladesh. The numbers of statistic community are 330 companies in Dhaka Stock Exchange. All 10 companies belong to the Food & Allied, Ceramics and Cement industry listed at DSE index are included as the sample for a phase from 2008 to 2017. In this paper, Fixed Effect Model along with Random Effect Model has been used to estimate outcomes. Both Models are exercised on panel data for explaining the association between dividend payments and share prices after adjusting several variables including Earnings per Share, logarithm value of Profit after Tax, Growth of Asset and Dividend Payout Ratio. The study also checked both the Models and found Random Effect Model is more significant than Fixed Effect Model. Afterward, this paper applied the multicollinearity test to determine is there any correlation among the variables and found no multicollinearity. This paper found a weak form market exists in Bangladesh and investors choose stock dividend more than the cash dividend.

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“…(Rashid, Rahman, 2008) noted a positive effect of the dividend yield on price volatility of stocks listed on the Dhaka Stock Exchange between 1999 and 2006, but the relationship was not statistically significant. Their results were confirmed for the years 2008-2017 in the studies by (Hossin, Ahmed, 2020) The results of the research presented so far clearly indicate the existence of an effect of dividend policy on the volatility of stock returns as measured by the standard deviation, most often estimated using a procedure based on the use of extreme values. However, it should be noted that the spectrum of risk measures is much wider, and the use of a single (though undoubtedly common and methodologically sound) risk measure limits the universality of the conclusions drawn.…”

Examining Volatility in Bank Stock Prices: A Comparative Exploration of Dividend Policies, Macroeconomic Influences, and Company-Specific Factors

“…On a research based on the Bangladeshi financial service industry conducted by Provaty and Siddique (2021) discovered a substantial positive alliance between dividend yield and stock price volatility across the chosen companies. Hossin and Ahmed (2020) attempted to examine the same study on firms chosen from the Ceramics, Food & Allied, and Cement industries listed at DSE index. "Fixed effect" and "Random effect" models have been run using panel data to elucidate the link between dividend payments and stock prices after various variables, such as EPS, logarithm of growth of asset, profit after tax and dividend payout ratio, have been adjusted.…”

“…Earnings Per Share (EPS): As a proxy of profitability, earnings per share is used in this research. The variable earnings per share can be derived by dividing net income after taxes by the total number of outstanding shares (Ahmed et al, 2014;Hossin and Ahmed, 2020;Provaty and Siddique, 2021).…”

The impacts of IPO financing and monetary policy on economic growth in Bangladesh: Evidence from a dynamic assessment

“…Earnings per share is considered as a proxy for profitability and is calculated by dividing net income by the number of common shares outstanding at the beginning of the year (Chen et al, 2009;Shah and Umara, 2016;Hossin and Ahmed, 2020).…”

“…Institutions and long-term investors give due concern to the dividend policies of companies. Stock price movements and dividend policies are significantly affected by the level of information risk (Hossin and Ahmed, 2020). Consequently, investors require paying close consideration to their dividend returns and the riskiness of their investments.…”