Impact of Dividend Policy on Stock Price Volatility:A Case Study of Pakistani Capital Market

This research is carried out with an objective to find out impact of dividend policy on share price volatility focusing on one of the financial industry of Pakistani capital market i.e. the commercial banks. Dividends are part of the firm’s earnings which is distributed among the stockholders. Numerous studies and literature is available from the various financial and non-financial sectors that how stock price and stock market reacts in response to decision taken by the management with relation to dividend payments. Lot of studies has been conducted from the perspective of developed countries but very little work has been done from the south Asian’s countries perspective like Pakistan. Current study analysis uses LSDVM, PRM, FEM and REM techniques to determine the significant impact of dividend and related variables like earning per share on the stock market valuation of various commercial banking firms. In this study a sample of 17 banks has been selected which are listed in Karachi stock exchange (KSE). Various variables which can possibility impact the stock market evaluation are taken covering a time span from the year 2007 to 2012.Contemporary analysis explains that stock price volatility of the banks has been determined by dividend and other related factors. Pannel data model analysis suggests that there is a significant positive relationship between the stock price variation and set of variables explained specifically in the chapter titled as “Results and Findings”. A variety of factors were observed that could be regarded as elements while making a plan in stock price instability and increasing financial outcomes. The impact of current study analysis can be viewed from its role in order to fill the gap in the theoretical framework. Current results can be incorporated to the unoccupied literature field and can help to make available as a foundational tip on which studies in future would be carrying out. Keywords: Dividend Policy, Stock Price Volatility, Financial Sector, KSE