“DIVIDEND POLICY AND STOCK PRICE VOLATILITY:

EVIDENCE FROM INDIAN CAPITAL MARKET”

DISSERTATION REPORT

Submitted to

RAJAGIRI BUSINESS SCHOOL

In partial fulfilment of the requirements for the award of

POST GRADUATE DIPLOMA IN MANAGEMENT (2011-13)

Submitted by

RAMAKRISHNAN. K (P11189)

Rajagiri Business School

Rajagiri Valley
Kochi-682039
 DECLARATION

I, RAMAKRISHNAN. K, student of Rajagiri Business School, Kochi, hereby declare that the
Dissertation report titled “Dividend policy and stock price volatility: Evidence from the
Indian capital market” is a bona fide report of the study done by me. This study was
undertaken in partial fulfilment of the requirement of the Post Graduate Diploma in
Management at Rajagiri Business School. All the information mentioned in this report is
collected from authenticated sources.

PLACE: Kakkanad
DATE: 14/03/2013 RAMAKRISHNAN. K
 ACKNOWLEDGEMENT

First of all, I would like to thank God Almighty for his blessings and guidance in this
endeavour. I would like to express my gratitude to Dr. Joseph I. Injodey, Hon. Dean,
Rajagiri Business School, for giving me the opportunity to do this project.

I express my deep sense of gratitude to my guide Dr. Roshna Varghese for giving me her
valuable guidance for successfully completing my dissertation study.

I am also grateful to all other faculty members of Rajagiri Business School, who have helped
me with their valuable suggestions.

Last but never the least; I would like to thank my parents and my friends for their invaluable
support and guidance, without which this report would not have been possible.

RAMAKRISHNAN. K
 TABLE OF CONTENTS

EXECUTIVE SUMMARY....................................................................................1

CHAPTER 1 INTRODUCTION.....................................................................2
1.1 Introduction......................................................................................3
1.2 Problem statement...........................................................................4
1.3 Significance of the study.................................................................4
1.4 Objectives of the study...................................................................5
1.5 Chapter scheme................................................................................6

CHAPTER 2 LITERATURE REVIEW.........................................................7

CHAPTER 3 THEORETICAL FRAMEWORK.........................................11

3.1 Dividend policy.................................................................................12
3.2 Relevance of dividend policy..........................................................12
3.3 Irrelevance of dividend policy........................................................16
3.4 Stock price volatility.........................................................................18
CHAPTER 4 RESEARCH METHODOLOGY..........................................20
4.1 Introduction......................................................................................21
4.2 Hypotheses of the study..................................................................21
4.3 Universe and sample of the study..................................................22
4.4 Method of data collection...............................................................22
4.5 Variables of the study and their measurement ...........................22
4.6 Research model................................................................................24
4.7 Techniques of analysis.....................................................................24
4.8 Period of the study...........................................................................24
4.9 Limitations of the study....................................................................25
CHAPTER 5 DATA ANALYSIS AND INTERPRETATION...............26
5.1 Sample profile....................................................................................27
5.2 Descriptive statistics..........................................................................30
5.3 Hypotheses testing............................................................................31
CHAPTER 6 FINDINGS AND CONCLUSION......................................39
6.1 Findings of the study........................................................................40
6.2 Conclusion.........................................................................................41
BIBLIOGRAPHY...................................................................................................42
ANNEXURE............................................................................................................45
 LIST OF TABLES

TABLE NO. TITLE PAGE NO.

Table 5.1 Classifications on the basis of Size.............................................27

Table 5.2 Classifications on the basis of PAT...........................................28

Table 5.3 Classifications on the basis of Ownership................................29

Table 5.4 Descriptive Statistics.....................................................................30

Table 5.5 Correlation Analysis.....................................................................32

Table 5.6 Regression Analysis.......................................................................32

Table 5.7 Correlation Analysis 2007-08......................................................33

Table 5.8 Regression Analysis 2007-08.......................................................33

Table 5.9 Correlation Analysis 2008-09.......................................................34

Table 5.10 Regression Analysis 2008-09........................................................34

Table 5.11 Correlation Analysis 2009-10.......................................................35

Table 5.12 Regression Analysis 2009-10........................................................35

Table 5.13 Correlation Analysis 2010-11.......................................................36

Table 5.14 Regression Analysis 2010-11........................................................36

Table 5.15 Correlation Analysis 2011-12.......................................................37

Table 5.16 Regression Analysis 2011-12........................................................38

 LIST OF FIGURES

FIGURE NO. TITLE PAGE NO.

Figure 4.1. Research Model...............................................................................24

Figure 5.1 Classification of the firms on the basis of size............................28

Figure 5.2 Classification of firms on the basis of PAT................................29

Figure 5.3 Classification of firms on the basis of ownership......................30