Effect of dividend policy on share price: empirical evidence from ghana stock exchange

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The impact of dividend policy on stock prices in Ghana is the focus of this research. The study uses secondary data from the yearly financial reports of 15 listed corporations between 2010 and 2021 to examine the connection between dividend policy and share prices via the lens of an explanatory research design and quantitative analysis. Fixed effect regression models are employed, along with robustness tests to address endogeneity, heteroscedasticity, serial correlation, and multicollinearity. The findings underscore a significant negative relationship between Dividend Policy and Share Price, suggesting that companies with higher dividend pay-outs tend to experience lower share prices. Moreover, the examination of determinants of Share Price revealed that Earnings (ER) positively influence Share Price, while Inflation (INF) exhibits a negative impact. Gross Domestic Product Growth (GDP) positively correlates with Share Price, whereas Interest Rate (INR) negatively affects it. Considering the study's insights, it's recommended that investors balance dividend policy decisions to maintain growth prospects. Policymakers should monitor inflation's impact and consider measures to mitigate its effects. Firms should align strategies with economic expansion, while investors should factor interest rate dynamics into their decisions for better risk management. Also, future research could explore the role of corporate governance and market sentiment in shaping share price dynamics.
A thesis submitted to the department of accounting and finance, college of humanities and social sciences, in partial fulfillment of the requirements for the award degree of master of science in accounting and finance