Impact of Dividend Policy on Share Price Volatility: Evidence from Sri Lanka

This paper investigates how dividend policy affects share price volatility among companies on the Colombo Stock Exchange from 2012 to 2020, including the COVID-19 period. Using a fixed effects model that explains 70% variability, we find both dividend per share and payout ratio significantly reduce share price volatility. Results remain robust even after excluding 2020 data. We identify several policy implications including how our results are useful for policy makers in understanding financial market instability and how investors can factor information in forecasting market prices.