The Effect of Dividend Policy, Profitability, and Leverage on Share Price Volatility of Service Sector Enterprise Indexed on the Indonesia Stock Exchange During 2015–2019

DOI

10.2991/978-94-6463-008-4_17How to use a DOI?

Keywords

Share price volatility; Dividend payout ratio; Dividend yield; Return on equity; Debt-to-equity ratio

Abstract

This research analyzes the effect of dividend payout ratio, dividend yield, earnings volatility, and debt-to-equity ratio on share price volatility in service sector enterprise indexed on the Indonesia Stock Exchange during the 2015–2019 period. This study used a quantitative approach with multiple linear regression. The findings of this study indicate that observations on the Indonesia Stock Exchange show that the dividend payout ratio has a compelling positive effect on share price volatility. This is because the higher the dividend yield, or the more enterprise pay dividends each year, the more volatile the stock price will be because the demand for the company’s shares increases [1]. However, the dividend yield has no compelling adverse effect on share price volatility because investors prefer capital gains over dividends. After all, the tax imposed on dividends is higher. Then earnings volatility has a compelling positive effect. This is because, traditionally, profit has been used as an indicator to measure a company’s financial performance [2]. Enterprise with consistent earnings are less likely to surprise investors with unexpected earnings announcements. The debt-to-equity ratio has a marginally favorable impact on stock price volatility. This is because, according to the trade-off hypothesis, the company’s decision to employ debt can be viewed as a way to avoid tax on loan interest payments and financial distress expenses produced by the growth of company debt.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Shieryn Fiorenza
AU  - Liliana Inggrit Wijaya
AU  - Bertha Silvia Sutejo
PY  - 2022
DA  - 2022/12/05
TI  - The Effect of Dividend Policy, Profitability, and Leverage on Share Price Volatility of Service Sector Enterprise Indexed on the Indonesia Stock Exchange During 2015–2019
BT  - Proceedings of the 19th International Symposium on Management (INSYMA 2022)
PB  - Atlantis Press
SP  - 126
EP  - 133
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-008-4_17
DO  - 10.2991/978-94-6463-008-4_17
ID  - Fiorenza2022
ER  -