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Research Journal of Finance and Accounting www.iiste.org

ISSN 2222-1697 !a"er# ISSN 2222-2$%7 &nline#

'ol.6( No.2)( 2*1+

16

Dividend Policy, Stock Price Volatility & Firm Size Moderation:

Investigation of Bird in Hand !eory in Pakistan

Sai,a Nasir haudr

Scholars /oha,,ad Ali Jinnah 0niersit Isla,aad

Sa3id I4al

Facult of /anage,ent Sciences Indus International Institute 5-han

/aheen 8utt

Scholars /oha,,ad Ali Jinnah 0niersit Isla,aad

"#stract

he current stud h"othesi:ed diidend "olic on stoc; "rice olatilit with ,oderating i,"act of fir, si:e

with res"ect to ird in hand theor. he stud inestigated ,anufacturing sector of !a;istan. And hae found

significant i,"act of fir, si:e etween diidend "olic facets and stoc; "rice olatilit. he conniance

sa,"ling techni4ue is used for data ac4uisition and the "eriod of data consists fro, Jan 2**9 to 5ec 2*1). hus(

u" to the ird in hand theor all h"othesis of the stud are acce"ted and stud reealed ;e i,"lication with

res"ect to historic inestigations.

$ey%ords: onenience Sa,"ling( /anufacturing Sector( !a;istan( <"othesis

' I()*D+I*(

he current stud inestigates the relationshi" of diidend "olic of !a;istani cor"orate sector with stoc; "rice

olatilit ,oderating i,"act of cor"orate si:e. he diidend "olic is rich to"ic and stoc; "rice olatilit has

reealed hot i,"lications for theorists and "ractitioners !ar;inson( 19$*#.Stoc; "rices olatilit is a "heno,enon where stoc; "rices deiates in inde= fro, aerage leel to

u"ward or downward. Such u"ward and downward trends are re-"ronounced as ullish and earish trends of

stoc; "rices. Such trends occurs ecause of arious actiities inter"laed co,"anies within their o"eration.

hus( diidend "olic is one of the o"erational actiit and ingredient that "inches cor"orate stoc; "rices Roll(

19$)> Irfan and Nishat( 2**)#. /oreoer( diidend "olic is an o"erational "rocedure in order to "a returnstowards cor"orate share holders with e=tent of their inest,ent in co,"an?s shares.Such inest,ents of shareholder?s are e=ecuted the, in co,"anies u" to their traditional( e,otional

and rational senti,ents. 'arious financial senti,ents are "rofound and inestigated historic studies regarding

shareholders i-e rate of return( return on e4uit( and return on assets( "ree,"tie right and oting rights. hus(

fir, si:e is one of the, that is ,ainl considered cor"orate share holders and is rich in inestigation.

/oreoer( Fir, si:e is usuall "ronounced as actual si:e of the co,"an that is ,easured through the alue of

net sales olu,e.It is the fir, si:e that shuffles arious financial ingredients of the co,"an including ca"ital structure

and a,ount of inest,ent I4al et al.( 2*1%# Fir, si:e has ital role in deter,ining the leel of credit ris; and

has negatie relationshi" with credit ris; I4al( haudr and I4al( 2*1+#. /oreoer( it is the fir, si:e that

leads its i,"roised role with li4uidit ris;( enhances cor"orate "roductiit I4al et al.( 2*1+# and also

increases sste,atic ris; I4al( I4al @ han( 2*1+#. /oreoer( a,eer at al. 2*1)# e="lained in their stud

that fir, si:e has "ositie relationshi" with diidend "olic antecedents under the u,rella of ird in handtheor.

In this concern( Asghar et al. 2*1)# reealed in their stud that there is "ositie relationshi" etween

diidend "olic and stoc; "rices ut it is the fir, si:e that shuffles such relationshi" ecause of ariant nature of

fir, si:e in arious sector?s and such ariailit ,a;es the relationshi" etween diidend "olic and stoc; "rices

,ore sensitie.hus( current stud ai,ed to inestigate the ,oderating i,"act of fir, si:e etween diidend "olic

and stoc; "rice?s olatilit. /oreoer( stud ai,ed is to inestigate the nature of decisions and shareholders

senti,ents towards stoc; "rices olatilit and diidend "olic. Bhile( ird in hand theor is used as theoretical

ase that e="lains as diidend "roisions the co,"anies enhance cor"orate alue. /oreoer( stud will reeal

;e i,"lications for theorists and "ractitioners of financial world s"ecificall in !a;istan.

he "art *1 of current stud e="lains introduction and literature citations releant to theoretical fra,e-wor;> "art two elaorates the stud ,ethodolog( including ,easure,ent ,odels and h"othesis. !art three

e="lains the stud results and analses. Bhile( "art four clarifies the findings and conclusion of stud.

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'ol.6( No.2)( 2*1+

17

-' ).S.")H M.H*D*/*01

he current is e="lorator in nature and e="lores the nature of relationshi" with ,oderating i,"act of fir, si:e

a,ong diidend "olic and stoc; "rice olatilit. hus( the stud contains on one de"endent ariale diidend

"olic ,easured four "ro=ies? i-e diidend "aout ratio( earnings olatilit( diidend ield and growth in

assets. Bhile( there is one de"endent ariale as stoc; "rice olatilit and one ,oderating ariale na,ed as

fir, si:e.hus( the stud used conniance sa,"ling a""roach to gather the data and to use it further for analses.

And the sector of inestigation is ,anufacturing sector of !a;istan ,ainl where ce,ent sector( "har,ac sector(

8eerages sector( Food Sector and electronics sectors are used as stud inestigation units. hus( the data

consists fro, 2**9 to 2*1). he nature of data of the stud is "anel. /oreoer( regarding instru,entation stud

used descri"tie analses( data reliailit and alidit tests( correlation analses and ,oderating regression

analses. So the the,atic ,odel of the stud is as follows(

In aoe ,entioned ,odel there is one inde"endent ariale as diidend "olic and it is ,easured four "ro=?s i-e diidend "aout ratio 5!&#( growth in Assets A#( earnings olatilit C'# and diidend ield

5D# res"ectiel. here is one de"endent ariale as stoc; "rice olatilit !'# and one ,oderating ariale as

fir, si:e FS#.

So on the ases of aoe ,odel and theoretical fra,e wor; h"othesis of the stud are(

/ain <"othesis#

H1: There is positive relationship between dividend policy facets and stock price volatility

H2: There is moderating relationship of firm size between dividend policy facets and price volatility

Su <"othesis#

H1: There is positive relationship of dividend payout ratio with price volatility

H2: There is positive relationship of growth in assets with price volatility

H3: There is positive relationship of dividend yield with price volatility

H4: There is positive relationship of earnings volatility with price volatility

H: There is a moderating relationship of firm size between dividend payout and price volatility

H!: There is a moderating relationship of firm size between growth in assets and price volatility

H": There is a moderating relationship of firm size between dividend yield and price volatility

H#: There is moderating relationship of firm size between earnings volatility and price volatility

hus( the ,easure,ent ,odels on the ases of aoe h"othesis of ,entioned ariales are as follows(

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'ol.6( No.2)( 2*1+

1$

2' ).S+/S

ale *1

5escri"tie Statistics#

'ariales /ean /edian

5!& *.7$ 1.71

C' 1.+6 ).%%5D ).%+ 6.*9

A 7.$9 11.11

FS 2.)1 7.))

!' 11.+6 2%.+6

he tale *1 e="lains the results of descri"tie statistics where the ,ean alue of 5!& is *.7$ and

standard deiation is 1.71( C' has ,ean alue as 1.+6 and standard deiation alue is ).%%( 5D ,ean alue is

).%+ and deiation alue is 6.*9( growth in assets ,ean alue is 7.$9 and deiation alue I 1.11( fir, si:e has

,ean alue as 2.)1 and standard deiation alue is 7.))( "rice olatilit has ,ean alue as 11.+6 and deiation

alue is 2%.+6 res"ectiel.

ale *2

Reliailit Analses#

'ariales No of &seration ronach?s Al"ha

5!& 22$9 *.$9

C' 22$9 *.71

5D 22$9 *.77

A 22$9 *.$2

FS 22$9 *.76

!' 22$9 *.7+

he tale *2 elaorates the reliailit results where total nu,er of oserations consists of 22$9 ofthe entire sa,"le tested in current stud. /oreoer( reliailit al"ha alue of diidend "aout 5!&# is *.$9(

earnings olatilit C'# is *.71( diidend ield 5'# *.77( growth in assets A# *.$2( fir, si:e FS# is *.76 and

"rice olatilit !'# is *.7+ res"ectiel. <ence( data of all ariales is reliale and suitale for testing ecause

their reliailit alues are found greater than *.71.

ale *)

orrelation Analses#'ariales 5!& C' 5D A FS !'

5!& 1C' *.21EE 1

5D *.)1EE *.))EE 1

A *.)6EE *.)9EE *.%%EE 1

FS *.++EE *.+7EE *.61EE *.67EE 1

!' *.+2EE *.+$EE *.6%EE *.67EE *.72EE 1

he tale *) e="lains the correlation ,atri= of stud. hus( diidend "aout is correlated with earnings

olatilit as *.21EE "*.*1#( earnings olatilit is significantl correlated with diidend ield as .))EE "*.*1#(diidend ield is significantl correlated with growth in assets as *.%%EE "*.*1#( growth in assets are

significantl correlated with fir, si:e *.67EE "*.*1# and fir, si:e is significantl correlated with *.72EE

"*.*1#. /oreoer( rice olatilit is significantl correlated as *.+2EE "*.*1#( *.+$EE "*.*1#( *.6%EE

"*.*1# @ *.67EE "*.*1# res"ectiel.

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'ol.6( No.2)( 2*1+

19

ale *%

/oderated Regression Analses#

!redictor?s G R 2 $R 2

Ste" *1

5!& *.*+EE .++) .7%+

C' .2)+EE5D .17$EE

A .26+EE

FS 1.29EE

Ste" *2

5!&EFS .1+7 .%)1 .**%

C'EFS .*$7

5DEFS .11)

AEFS .17%

he ,oderated regression analses are used of fir, si:e in current stud ecause the stoc; ,ar;et

"erfor,ance and ,atter of return to shareholders are "inched s,all and large si:e of the fir,s. hus( tale *%

re"orted ,oderated regression of fir, si:e etween diidend "olic and stoc; "rice olatilit. In ste" one

diidend "aout eta is found *.*+ "*.*1#( earnings olatilit *.2)+EE "*.*1#( diidend ield *.17$EE

"*.*1#( growth in assets *.26+EE "*.*1# and fir, si:e 1.29EE "*.*1# res"ectiel. here all ariales are

"redicted significant in current stud with "rice olatilit.

/oreoer( in third ste" interaction ter,s are generated for the "ur"ose to test fir, si:e ,oderation. So

fir, si:e ,oderates diidend "aout ratio with 1.+7( earning olatilit is ,oderated with *.$7( diidend ield is,oderated with .11) and growth in assets is ,oderated with 17%. hus( oer all diidend "olic is ,oderated

fir, si:e as *.+)1. <ence( there is insignificant interaction of fir, si:e with e="lanator ariale facets.

3' *(/+SI*(

he current stud found significant "ositie relationshi" etween diidend "olic facets i-e diidend "aouts(

growth in assets( earning olatilit( diidend ield and stoc; "rices olatilit. /oreoer( there is found a,oderation of fir, si:e etween diidend "olic facets and stoc; "rices. hus( the ,anagers hae to focus fir,

si:e ,ore i,"ortantl in their decisions and hae to e=ecute the "olicies in a wa that inest,ent of shareholders

,a oost that will rise cor"orate share "rices towards "re,iu, "rices that will gie ,ore returns to co,"anies

and diidend to shareholders.

).F)"(.SAsghar et al 2*1%#. I,"act of 5iidend !olic on Stoc; !rice Ris;H C,"irical Cidence fro, C4uit /ar;et of

!a;istan. %ar &ast 'ournal of (sychology ) *usiness+ ,ol 4 -o 1 .2/110

Nishat. /. and . /. Irfan. 0n"ulished#. 5iidend !olic and Stoc; "rice 'olatilit in !a;istan.

Roll( R. 19$) he turn of the ear effect and return "re,iu, of s,all fir,s( Journal of !ortfolio

/anage,ent.1*H1$-2$

S. I4al et al.( 2*1%#. a"ital Structure Antecedents. A ase of /anufacturing Sector of !a;istan. nternational

'ournal of 3!/o anagement eview+ ,ol /2+ ssue /2 .2/140

S. I4al et al.( 2*1+#. I,"act of i4uidit ris; on Fir, S"ecific Factors. A ase of Isla,ic 8an;s of

!a;istan . 'ournal of *usiness and anagement esearch+ ,ol+ / pp+ 2!52!/+

S. I4al( S. N. haudr @ 5. N. I4al.( 2*1+#. I,"act of Fir, S"ecific Factors on redit Ris;> A ase ofarachi Stoc; C=change. esearch 'ournal of %inance and 6ccounting+ ,ol+ 117 -o+ /! .2/10a,eer et al( 2*1)#. 5eter,inants of 5iidend !olicH A ase of 8an;ing Sector of !a;istan. iddle &ast

'ournal of 8cientific esearch7 1#./30: 41/5424

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