Dividend Policy Decisions and Share Price Volatility of Quoted NonFinancial Firms in Nigeria

ABSTRACT

Dividend policy is one of the most vital financial decisions that corporate managers encounter. This study examined the effect of dividend policy decisions on share price volatility of quoted non-financial firms in Nigeria. It is argued in the study that dividend policy decisions which are internally controlled factors are instrumental in influencing the share price volatility of firms. The study employs secondary data collected from the sampled non-financial firms’ annual audited financial statements. Data used involves seventy four (74) non-financial firms quoted on the Nigerian Exchange Limited for the period of 2010 to 2021. In order to present a robust outcome in the relationships, the Generalized Autoregressive Conditional Heteroskedacity (GARCH) was used to ascertain and generate the volatility properties of the share prices, while the dynamic panel data estimation procedure was adopted based on the system Generalized Method of Moments (GMM) estimation technique to capture the relationship between dividend decisions and share price volatility and the data were estimated with the aid of Eviews 9.0 econometric statistical package using dependent variable (share price volatility), explanatory variables (dividend payout ratio, dividend yield, dividend per share, firm size and leverage). The results from the study reveal that dividend payout ratio and dividend per share exert significant positive effects on share price volatility while dividend yield, firm size and leverage were found to have significant negative impact on share price volatility. The study concluded that dividend payout ratio, dividend yield, dividend per share, firm size and leverage are significant factors that can be used for predicting the volatile movement in share prices of quoted non-financial firms in Nigeria. The study recommends among others that dividend payment should be consistent and smoothed to disrupt volatility of share prices since dividend payment is found to be significant determinant of stock price volatility.