The effect of dividend policy on stock price volatility and investment decisions

Abstract

The allocation of a part of the profit as the dividends considered as one of the significant issues in financial management. Through applying this policy, the main purpose is the capital maximization of stockholders by receiving the dividend and increasing the stock price. The purpose of the present research is to assess the effect of dividend policy on stock price volatility and investment decisions. The statistical community of the present research includes the admitted firms into the Tehran Stock Exchange of which only 65 firms have been selected after the application of the considered criteria. The time of the research is three years from 2007 to 2012 and correlation analysis method and multiple regressions were used in order to analyze the data and test the hypotheses. The research results indicate that the dividend policy has a significant effect on stock price volatility in a short time. However, the dividend policy does not have a significant effect on stock price volatility in a long time. Moreover, the dividend policy does not have a significant effect on investment decisions in terms of cash and accrual.