The Influence Of Cash Dividend On Stock Price Volatility

Since the stock market was founded,stock price fluctuations have plagued investors and listed companies.On the one hand,the investor's investment income is composed by capital gains and dividend income.If listed company do not pay cash dividends,investors can only keep buying and selling to get profits from price fluctuations.This is likely to increase investment risk and increase the volatility of the stock market.On the other hand,the ups and downs of stock price may have negative impact on their market image.This paper use Shanghai a-share panel data from 2007 to 2016 as samples,study the relationship between cash dividends level(the dividend yield and dividend payment rate)and stock price volatility by panel regression analysis.The research shows that the level of cash dividend is negatively correlated with the fluctuation rate of stock price.While the square of the dividend of cash dividend is positively correlated with the volatility of stock price.This shows that with the increase of cash dividend,stock price volatility will decline.But this kind of negative correlation have a tipping point.When the cash dividend get more than the tipping point,the increase of cash dividends will exacerbate share price volatility.This paper is different from most previous research which is using event study,watch less than 10 days after dividend announcement whether there is abnormal returns.This paper extend study time window to ten years,to explore whether the long-term stability and high level of cash dividends are associated with stable stock prices or not.In terms of research methods,this paper has set a one year lag period while the previous studies did not have such lag period.This is very necessary,because the investor can only get dividend policy one year later.In terms of research Angle,this paper have two perspective to discuss the effect of cash dividend on stock price fluctuations.In terms of robustness test,in order to eliminate systemic risk on the fluctuation of stock price,this paper combined the Shanghai a-share index and the stock price volatility into the non-system risk index.Then this paper replaces the sample space with company of shenzhen a-shares.The results of the two regression were basically the same as before,indicating that the conclusion of this paper was tested by robustness.Therefore,it is of great significance for listed companies to lead the implementation of the prudent dividend policy.For supervision organizations to perfect the laws and regulations.For investors to establishment value investment theory.