The impact of dividend policy on share price volatility: Evidence from listed companies in Gulf Cooperation Council countries

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Abstract

The volatility of share prices is of high importance to investors since it formulates the investment strategies that should be followed or even helps in deciding the right time and company to be selected for investment purposes. The Gulf Cooperation Council (GCC) investors should find this empirical study of high importance since it will highlight the main company characteristics that should be taken into consideration when formulating the expectations of future share prices. This study examines the impact of dividend policies on share price volatility, focusing on non-financial companies of GCC countries that were listed between 2010 and 2021. All non-financial companies (532) listed in Saudi Arabia, Oman, Qatar, the UAE, Kuwait, and Bahrain were collected but 380 companies were excluded due to unavailable data set for the period of study. The panel regression is used to test the impact (fixed and random effects techniques) but the Hausman test favored the fixed effects results. The dependent variable is share price volatility, while the independent variable is the dividend yield, which serves as a stand-in for dividend policy. The relationship between share price volatility and a set of controls, including size, growth, and leverage, is also examined in this paper. According to the results, size and leverage have a significant negative relationship with share price volatility, but growth has an insignificant positive impact. Dividend policy has no impact on share price volatility. In other words, dividend policy does not fluctuate share prices in GCC.

Keywords: Dividend Policy, Share Price Volatility, Qatar Stock Exchange, Fixed Effects Technique

Authors’ individual contribution: Conceptualization — B.A.K. and S.A.A.; Methodology — B.A.K. and A.B.A.; Validation — A.B.A.; Formal Analysis — B.A.K., A.B.A., and S.A.A.; Investigation — B.A.K. and A.B.A.; Resources — S.A.A.; Data Curation — A.B.A. and B.A.K.; Writing — Original Draft — B.A.K., A.B.A., and S.A.A.; Writing — Review & Editing — B.A.K., A.B.A., and S.A.A.; Supervision — B.A.K. and A.B.A.; Project Administration — B.A.K. and A.B.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G0, G1, G3

Received: 12.02.2023
Accepted: 01.06.2023
Published online: 05.06.2023

How to cite this paper: Khalaf, B. A., Awad, A. B., & Ahmed, S. S. (2023). The impact of dividend policy on share price volatility: Evidence from listed companies in Gulf Cooperation Council countries [Special issue]. Corporate & Business Strategy Review, 4(2), 289–295. https://doi.org/10.22495/cbsrv4i2siart8