Abstract:
Despite many studies conducted abroad, a study on the effect of dividends on share
price volatility could not be found in the Sri Lankan context relating to banks and
finance companies. Therefore, this study examines how dividend affects the share
price vo latility of banks and finance companies listed on the Colombo Stock Exchange.
The data was collected from 16 banks and 38 finance companies during the ten years
from 2011 to 2020. The dividend was measured using the dividend yield and dividend
payout. The share price volatility was measured by dividing the annual range of share
price by the average of the highest and lowest adju sted share price for each year. The
firm size, growth, and earnings per share were used as control variables. Regression
analysis w as used to analyze the data. The results show that dividend yield has a
negative effect on share price volatility. Nevertheless, dividend payout positively
affects the share price volatility. Firm size and earnings per share have a negative
relationship with share price volatility. However, firm growth does not affect the share
price volatility.
