Open AccessThe Impact of Dividend Policy on the Relationship Between Institutional Ownership and Stock Price Volatility: Evidence from Pakistan
Author(s) -
Atif Hussain
Publication year - 2013
Publication title -
lahore journal of business
Language(s) - English
Resource type - Journals
ISSN - 2223-0025
DOI - 10.35536/ljb.2013.v2.i1.a5
Subject(s) - dividend policy , stock exchange , volatility (finance) , panel data , monetary economics , dividend , stock (firearms) , stock price , economics , institutional investor , business , dividend yield , financial economics , dividend payout ratio , econometrics , finance , corporate governance , series (stratigraphy) , biology , engineering , paleontology , mechanical engineering
This study aims to determine the effects of dividend policy on the relationship between institutional ownership and stock price volatility, based on a sample of 36 firms listed on the Karachi Stock Exchange over a seven-year period (2005–11). We use a fixed-effects model applied to panel data to investigate this relationship and find that institutional ownership has a negative relation with stock price volatility and a positive relation with the dividend payout ratio. The results also show that dividend payouts significantly affect the relationship between institutional ownership and stock price volatility. The mediating role of dividend policy between institutional ownership and stock price volatility reveals that institutional investors prefer to invest in low-volatility dividend-paying stock.
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