stdClass Object ( [id] => 15822 [paper_index] => 202505-15-021368 [title] => THE IMPACT OF DIVIDEND POLICY ON STOCK PRICE VOLATILITY: A COMPREHENSIVE ANALYSIS [description] => [author] => Ms. Mamtha Reddy, Mr.G.Vinesh Kumar [googlescholar] => [doi] => [year] => 2025 [month] => May [volume] => 13 [issue] => 5 [file] => fm/jpanel/upload/2025/May/202505-15-021368.pdf [abstract] => Purpose The purpose of this article is to understand the relationship between a company’s dividend decisions and the resulting changes in its stock market performance. Dividend policy refers to the strategy a company uses to decide the portion of earnings to distribute to shareholders versus reinvesting in the business. This research aims to examine how different dividend policies—such as consistent payouts, dividend cuts, or increases—affect investor perceptions, stock price stability, and overall market value. By analyzing this relationship, the study seeks to provide insights that can guide corporate financial strategies, help investors make informed decisions, and contribute to academic knowledge on market dynamics. Design/Methodology/Approach The methodology used to analyze the effect of dividend policy on stock price volatility is a quantitative research approach. Secondary data will be collected from publicly available financial reports and stock market data of listed companies over a predetermined time frame. Essential variables, including dividend payout ratio, dividend yield, earnings per share (EPS), and stock price volatility, will be identified and operationalized. The research will use statistical tools, like regression analysis and correlation, to study how measures of dividend policy have implications on stock price volatility. Companies will be picked from a particular sector or index for the sample for reasons of consistency and comparison. The data will be evaluated through SPSS or MS Excel, ensuring reliability and accuracy. Hypotheses will be developed to evaluate the significance of the relationship, and the results will be analyzed to extract meaningful insights concerning the impact of dividend policies on stock market behavior. Findings The results show an important relationship between dividend policy measures and stock price behavior. Companies that offer greater dividend payouts and maintain consistent dividend policies tend to have reduced stock price volatility, signifying that stable dividends help reduce uncertainty for investors while promoting stability in the market. On the other hand, firms that present irregular or low dividend payouts often experience higher price volatility, as investors seem to view them as risky investments. The dividend yield is inversely related to price volatility, meaning that higher-yielding stocks provide a cushion against market fluctuations. These results emphasize the importance of dividend policy as a strategic tool for managing investor confidence and market dynamics. Originality: The fundamental theories of finance and investment underscore the significance of dividends in ascertaining stock value and ensuring market stability, hence the genesis of the research concerning the impact of dividend policy on stock price volatility. Preliminary theories include the Dividend Irrelevance Theory proposed by Modigliani and Miller (1961), which argued that dividends do not influence stock prices in efficient markets. However, subsequent research has challenged this idea by underlining the importance of information asymmetry, signaling effects, and investor preferences in determining market behavior. Over time, researchers have looked into how differences in dividend policies influence stock price volatility, especially in emerging markets, where movements are usually more volatile. This research builds on these historical perspectives to address gaps in understanding how modern market dynamics and investor behavior intersect with dividend policies to shape the movement of stock prices. Research Limitations/Implications The study on the effect of dividend policy on stock prices is subject to several limitations. First, the relationship between dividend policy and stock price volatility is influenced by numerous external factors, such as macroeconomic conditions, industry trends, and market sentiment, making it challenging to isolate the impact of dividend policy alone. Also, due to the limitations in obtaining and using historical data, findings might get restricted, especially when sample sizes are limited or if such samples are only on some sectors or regions. Generalizability of the results could further be affected by variations of corporate governance practices, regulations, and tax policies. Moreover, investor behavior, which is one of the important determinants of stock price movement, is subjective and, therefore, cannot be reflected by a quantitative approach. Finally, the dynamics of financial markets mean that the relationship between dividend policy and stock prices can change with time, thereby limiting the study's generalizability to future market conditions. These limitations reveal the complexity of the topic and highlight the need for careful interpretation of the findings. Practical Implications: The analysis of the effect of dividend policy on stock prices offers several practical implications for corporate managers, investors, and policymakers.For a corporate manager, the knowledge can be of great aid in formulating dividend policies that are responsive to expectations of shareholders and market developments, thus leading to low stock price fluctuations and thereby increasing investor confidence. With a consistent and transparent dividend policy, long-term investors shall be attracted since it symbolizes financial stability. This will help investors to make better-informed decisions to balance the trade-off between income generation and capital growth. Policymakers will be able to use such insights to assess the regulatory changes on dividend distributions and its impact on market stability in general. Companies can use the findings to benchmark their dividend strategies against industry norms for competitiveness in attracting investment. Overall, these insights provide great guidance for enhancing financial decision-making and making capital markets more effective. Social Implications: The exploration of the effect of dividend policy on stock prices carries notable social implications, particularly in fostering economic stability and promoting financial literacy.The more transparent and consistent companies are in their dividend policies, the greater is the market trust and stability, which can boost investor confidence and participation. This will promote wider public participation in equity markets and provide avenues for people to create wealth and achieve financial independence. Furthermore, the understanding regarding the effects of dividend policies on prices might enable individuals to rely more on the information basis, thereby reducing speculative trades. A well-informed investment-based financial market enhances economic growth and, further leads to the efficient provision of resources. This again may be sustained by this factor and can help make positive impacts on society and all its people. It is also a way through which research could guide policymakers in making laws that protect investors and further ensure fair practices, contributing to social equity and economic inclusivity. [keywords] => [doj] => 2025-05-04 [hit] => [status] => [award_status] => P [orderr] => 1 [journal_id] => 15 [googlesearch_link] => [edit_on] => [is_status] => 1 [journalname] => International Journal of Asian Economic Light (JAEL) [short_code] => IJAR [eissn] => 2277-7741 [pissn] => [home_page_wrapper] => images/products_image/10.JAEL H.png ) Error fetching PDF file.