The Effect of Profit Distribution Policy on the Volatility of Stock Prices Traded on the Palestine Stock Exchange

Authors

Eman Herz, Islamic University of Gaza - PalestineFollow
Hisham Madi, Islamic University of Gaza - PalestineFollow
Mohammad Al-Ashi, Islamic University of Gaza - PalestineFollow

DOI

https://doi.org/10.35192/jjoas-h.v25i2.4

Abstract

This study aimed to test the impact of dividend policy on the fluctuation of stock prices traded on the Palestine Stock Exchange. A sample of 47 companies listed on the Palestine Stock Exchange was selected for the period from 2005 to 2016. A robust regression model was used to analyze cross-sectional data and test hypotheses. The objective of the study was to test the effect of dividend yield and cash dividend payout ratio on stock price fluctuation, with the addition of control variables: company size, profit fluctuation, growth, and debt. The statistical results showed a negative, statistically significant relationship between dividend yield and stock price fluctuation, while there was a positive, statistically significant relationship between the cash dividend payout ratio and price fluctuation. Additionally, debt exhibited a negative, statistically significant relationship with the fluctuation of stock prices on the Palestine Stock Exchange. The results of the study supported the theories of dividend distribution policy, particularly the “bird in the hand theory,” which is relevant in determining stock prices on the Palestine Stock Exchange.

Recommended Citation

Herz, Eman; Madi, Hisham; and Al-Ashi, Mohammad (2020) "The Effect of Profit Distribution Policy on the Volatility of Stock Prices Traded on the Palestine Stock Exchange," Jordan Journal of Applied Science-Humanities Series: Vol. 25: Iss. 2, Article 4.
DOI: https://doi.org/10.35192/jjoas-h.v25i2.4
Available at: https://digitalcommons.aaru.edu.jo/jjoas-h/vol25/iss2/4