The Impact of Dividend Policy on Share Price Volatility (a Case Study in Manufacturing Companies Listed in Idx From 2007-2012)

Abstract

The purpose of this research is to examine and analyze the impact of dividend policy on share price volatility in manufacturing companies listed in Indonesian Stock Exchange (IDX) in the period of 2007-2012. For this purpose, a sample 77 companies from 149 manufacturing companies listed in IDX for six years were selected based on criteria applied. As proxy for dividend policy, the researcher used dividend yield and dividend policy. This study also use some control variables to ensure the likelihood influence on share price volatility which comprised of firm’s size, earnings volatility, leverage, and asset’s growth. Multiple regression analyses are used in order to explore the influence of dividend yield, dividend payout ratio and other control variables on fluctuation of share price changes. The result of this study shows that only dividend payout ratio has a significant influence to the share price volatility, while dividend yield does not appear significant although show negative influence. From the empirical result obtained, it can be interpreted that the higher payout ratio, the lower share price volatility, and vice versa. In addition, the control variables that have a significant influence are earning volatility and leverage. Both of them have positive influence among others, which means that the higher earnings volatility and leverage will lead to the higher volatility of share price.