19

4
ABSTRACT
The aim of this research is to explore how the dividend policy of Vietnamese
companies can affect the stock price volatility. It uses the theoretical principles of five
theories, including bird-in-hand theory, agency cost, tax preference, dividend
irrelevance theory and signalling theory. Also, the researcher used the positivism,
deductive approach and quantitative method for the sample of 67 companies in the top
100 in the Vietnam stock exchange via the simple random sampling technique from
2009 to 2014. Therefore, three findings are captured in the study.
Firstly, 67 Vietnamese companies are accurately considered among top 100
Vietnamese companies in the stock market because of their high growth rate and large
firm size. But they are participating in an emerging market, in which the stock price
fluctuates very dramatically and the dividend policies emphasize the priority on the
shareholders.
Secondly, dividend policies are influential significantly and positively on the share
price volatility. The dividend relevancy theories underpin this result and justifies why
these policies could make change to the volatility in Vietnam, focusing on bird-in-
hand theory and agency cost theory. It reflects the capabilities of the Vietnamese
companies to affect and control the stock market as well as predict its change.
Lastly, the growth rate is found to influence positively and significantly the stock
price volatility while firm size, leverage and earnings volatility have no change on the
dramatic fluctuation of share price.

5
TABLE OF CONTENT
ABSTRACT.................................................................................................................. ii
LIST OF FIGURES .................................................................................................... vii
LIST OF TABLES..................................................................................................... viii
CHAPTER 1: INTRODUCTION..................................................................................1
1.1 Chapter introduction ............................................................................................1
1.2 Research background...........................................................................................1
1.3 Statements of problems........................................................................................2
1.4 Rationales of the research ....................................................................................3
1.5 Aim and objectives ..............................................................................................3
1.6 Significance of the research.................................................................................4
1.7 Research scope.....................................................................................................4
1.8 Structure of the thesis...........................................................................................5
1.9 Chapter conclusion...............................................................................................6
CHAPTER 2: LITERATURE REVIEW.......................................................................7
2.1 Chapter introduction ............................................................................................7
2.2 Relevant concepts in the study.............................................................................7
2.3 Overview of dividend policy theories..................................................................8
2.4 Dividend policy and stock market in Vietnam ..................................................12
2.4.1 Dividend policy in Vietnam........................................................................12
2.4.2 Stock market in Vietnam ............................................................................12
2.5 Impacts of dividend policy on stock price volatility..........................................13
2.5.1 Dividend policy and stock price volatility..................................................13
2.5.2 Other factors affecting stock price volatility ..............................................16
2.6 Conceptual framework.......................................................................................19
2.8 Research hypotheses ..........................................................................................20
2.9 Chapter conclusion.............................................................................................20
CHAPTER 3: METHODOLOGY ...............................................................................21
3.1 Chapter introduction ..........................................................................................21
3.2 Research philosophy..........................................................................................21
3.3 Research approach .............................................................................................22
3.4 Research method................................................................................................23
3.5 Measurement of variables..................................................................................23
3.5.1 Dependent variable .....................................................................................23

6
3.5.2 Independent variables .................................................................................24
3.5.3 Controlling variables...................................................................................24
3.6 Data collection ...................................................................................................25
3.6.1 Sampling and sample size...........................................................................25
3.6.2 Type and source of data..............................................................................25
3.6.3 Collection procedure...................................................................................26
3.6 Data analysis ......................................................................................................26
3.7 Ethical considerations ........................................................................................27
CHAPTER 4: ANALYSIS AND FINDINGS .............................................................28
4.2 Descriptive statistics ..........................................................................................28
4.2.1 Output of SPSS software ............................................................................28
4.2.2 Stock price volatility...................................................................................29
4.2.3 Dividend policy...........................................................................................29
4.2.4 Other characteristics of 67 Vietnamese companies ....................................30
4.3 Pearson’s correlation matrix ..............................................................................31
4.3.1 Output of SPSS software ............................................................................31
4.3.2 Forecasting the factors significantly affecting stock price volatility..........33
4.3.3 Associations of exploratory variables.........................................................34
4.4 Linear regression model.....................................................................................34
4.4.1 Model without the controlling variables.....................................................34
4.4.2 Model with controlling variables................................................................36
4.4.3 Variations of research model across six years ............................................39
4.5 Hypothesis testing..............................................................................................40
4.6 Discussion..........................................................................................................41
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS .................................43
5.2 Conclusion .........................................................................................................43
5.2.1 Summary of findings in the study and comparison with theory and
literatures..............................................................................................................43
5.2.2 Response to research objectives..................................................................44
5.3 Recommendations..............................................................................................44

7
5.4 Limitations and further studies ..........................................................................45
REFERENCES ............................................................................................................46
APPENDIX..................................................................................................................52
1. List of 67 Vietnamese companies........................................................................52

vii
LIST OF FIGURES
Figure 1: Conceptual framework .................................................................................19

viii
LIST OF TABLES
Table 1: Dividend policy theories................................................................................12
Table 2: Relevant researches on the impact of dividend policy on stock price volatility
..............................................................................................................................16
Table 3: Measurements of controlling variables..........................................................25
Table 4: Descriptive statistics of variables in the study...............................................28
Table 5: Rule of thumb to interpret Pearson correlation..............................................32
Table 6: Pearson’s correlation matrix of variables in the study...................................33
Table 7: F-Test of the entire research model with exploratory factors as DPR and DY
..............................................................................................................................35
Table 8: Regression model with exploratory factors as DPR and DY ........................35
Table 9: F-Test of the entire research model with exploratory factors of DPR, DY and
controlling factors ................................................................................................36
Table 10: Regression model with exploratory factors as DPR, DY and controlling
factors...................................................................................................................37
Table 11: Summary of model with exploratory factors as DPR, DY and controlling
factors...................................................................................................................38
Table 12: Variation of regression model across six years ...........................................39
Table 13: Hypotheses testing in the research...............................................................41

1
CHAPTER 1: INTRODUCTION
1.1 Chapter introduction
The chapter is to provide the basic understanding on the dividend policy and the
volatility of the stock price. It consists of the research background or research context
in both current academic aspect and practical aspect of the Vietnam stock exchanges.
This background is the underlying root for the identification of statement of problem,
research rationales as well as its aim and objectives. That means the chapter is a
picture to describe the situations in which the study is undertaken and completed and
the selected knowledge to cover it. Apart from these issues, the chapter also narrows
the scope for the research in two aspects, the academic theories and the case study. It
helps the researcher understand and explain the findings appropriately. Moreover, the
structure is discussed to generalize which sections and contents in the dissertation.
1.2 Research background
Investment in stocks is a popular strategy to increase the wealth of the people quickly
and substantially. It is the reason for the establishment of the stock exchange market,
in which the investors can interact with the organizations and their stocks via the
buying and selling process. However, risk is also very high in association with the
high returns for this investment strategy (Grinblatt et al., 2011). Such risk comes from
the stock price volatility, which refers to the fluctuations in the stock price over time.
It is a certain statement that any investor expects the higher returns from the increase
in stock prices, so, any change in these prices is strongly associated with their profits
(Zakaria et al., 2012). This statement explains the prioritized concerns of the investors
with the stock price volatility and its determinants. As a result, many academic
researchers express their efforts in investigating into the factors affecting the stock
price fluctuations, for instance, Allen and Rachim (1996), Nazir et al. (2010) and
Malik et al. (2012).
Among the wide range of possible determinants such as firm size, earning volatility,
leverage and growth, dividend policy is identified as the most important factor to
contribute to the fluctuation in the stock price (Mankiw et al., 1991; Nazir et al.,
2010). Dividend policy means the company strategy to decide how much payment to
the dividends and how much incomes to be retained earnings for the continual

2
investment (Hashemijoo et al., 2012). Because this policy determines the returns for
the investors, it is concluded to be largely relevant to the stock price volatility.
However, a problematic issue is the inconsistency in the empirical evidence on the
impact of dividend policy on the stock price volatility. For example, while Masum
(2014) supposed the positive and significant effect of this policy on stock price
change, Hashemijoo et al. (2012) identified the significantly negative link between
dividend policies and this fluctuation and Zakaria et al. (2012) concluded the mixed
result.
Above facts together emphasize the necessity of the research on the factor affecting
stock price volatility for both academic researchers and practical investors, focusing
on the dividend policy. The indecisive consequence in testing notices the
inapplicability of other cases to the specific case of companies listed in Vietnam stock
exchanges. As a result, the researcher decides to make real investigation into the
impact of dividend policy on stock price volatility of companies in Vietnam stock
exchanges.
1.3 Statements of problems
The first problem addresses the research question ―What is the impact of dividend
policy on stock price volatility?‖. It is derived from the inconsistency in the
measurement of the effects of dividend policy (Masum, 2014; Hashemijoo et al.,
2012). This problem is central in the study because it covers completely the research
topic. It is questionable since the interventions of the dividend policy are not clearly
found to put pressures or lessen the fluctuations in the stock prices. Then, for the
managers and financial analysts, they will face challenges in stabilizing the stock
prices in the stock market and making the prices to the expecting points via the
selection of appropriate dividend policies. Such challenges need to be answered
explicitly to explain the when the managers decide to use the dividend policy to adjust
the change in stock price. Stock price is not only the measurement of profitability of
the investors but also the indicator of the financial performance and market
attractiveness of the firm (Dalvi and Baghi, 2014).
In association with this central problem, another problem statement is arising,
focusing on the hardship in predicting the stock price in Vietnamese stock market,
which is still emerging and not well regulated (Nguyen, 2012). This market is largely
influenced from the external environment, thus the stock price will be very sensitive

3
to change. Because any unpredictable fluctuation in stock prices may cause the
increasing risks in the business and investment decisions, it is a noticeable problem
statement for the researcher to answer appropriately. Last but not least, the study also
examines the statement of problem on the model of the stock price volatility to
understand its determinants, for example, leverage, firm size, growth and earnings
volatility apart from the dividend policy. The reason is that the determinants have
varied across studies regardless of the increasing concerns in this topic such as Allen
and Rachim (1996), Nazir et al. (2010) and Malik et al. (2012). Therefore, when
dealing with this problem, the researcher can answer to the question ―What are factors
affecting stock price volatility in the companies listed in Vietnam stock exchange?‖.
1.4 Rationales of the research
In association with three statements of problems, the research is very rationale to be
completed. Its reasonability and necessity are eventually emphasized in the research
context in Vietnamese stock market because this market is emerging with the lack of
stable and well-regulated frameworks from the Government as well as sufficient
understanding of the investors (Nguyen, 2012). Also, because this market is largely
influenced by the external factors, it lowers the ability of the companies to use
dividend policy to control the fluctuation in this market. Hence, the researcher
addresses the rationale behind the selection of Vietnam stock exchange as the case
study.
Furthermore, with the importance of the understanding on the volatility of stock price,
the empirical test on the effects of dividend policy and other possible factors such as
firm growth, earnings volatility and leverage is useful to support both the companies
and the investors. The researcher would like to identify and demonstrate the picture
on the causes and consequences of the stock price volatility, focusing on its causes.
This rationale is derived from the first and last statement problems as well as the
inconsistency in the factors affecting the volatility of stock prices (Hashemijoo et al.,
2012; Zakaria et al., 2012).
1.5 Aim and objectives
The aim of this research is to explore how the dividend policy of Vietnamese
companies can affect the stock price volatility. In compliance with this aim, four
research objectives are drafted in line with the further chapters in the dissertation.

4
To review the relevant theories and literatures on the relation between
dividend policy and stock price volatility
To analyse the effects of the dividend policy on the fluctuation of stock price
of Vietnamese companies listed on stock exchanges
To conclude the determinants of the stock price volatility in the case of
Vietnamese companies
To recommend the Vietnamese companies to implement the appropriate
dividend policy and suggest the investors how to know the signals of change
in stock prices
Because of the conservative culture in declaring information in Vietnam, the
researcher will access about 67 companies in both HOSE and HNX of Vietnamese
stock exchange during five years from 2010 to 2014.
1.6 Significance of the research
The research is expected to explore the new findings on the case of Vietnamese
companies listed in Vietnamese stock exchanges in comparison with the existing
literatures. It may be the positive link between the dividend policy and stock price
volatility as the findings of Al- Hasan et al. (2013), or the negative impact of dividend
policy in line with the literatures of Masum (2014) and Lashgari and Ahmari (2014),
or eventually the mixed results like the discoveries of Nazir et al. (2010), Zakaria et
al. (2012), Hashemijoo et al. (2012) and Ilaboya and Aggreh (2013). The findings in
the study can support the agency cost and signalling theory or reject them to confirm
the dividend irrelevance theory. Regardless of the types of findings, the researcher
can explain how the dividend policy can impact the stock price volatility for the
Vietnamese companies.
Furthermore, in line with the third objective, it is necessary for the study to identify
the determinants of the stock price volatility in order to demonstrate the picture on the
fluctuation of stock price in Vietnamese stock market. Based on these discoveries, the
investors and managers can make forecast on the future share prices so that any
investment can be implemented appropriately and strategically.
1.7 Research scope
In term of theories, the researcher decides to focus on some popular dividend theories,
including, bird-in-hand theory, agency cost, tax preference, dividend irrelevance

5
theory and signalling theory. The reason for this concentration is the different
perspectives toward the effects of dividend policy on stock price volatility, for
example, dividend irrelevance theory supposes that the dividend policy will make no
sense to the volatility of the stock price (Al- Hasan et al., 2013). Thus, on the basis of
these theories, the researcher can know which framework is sufficient to cover the
case study of the companies listed in Vietnam stock exchanges.
Secondly, another research scope is the control on the exploratory factors as possible
determinants of the stock price volatility. Two elements of dividend policy are taken
into account, including the dividend payout and dividend yield, which are found
almost consistently in the previous studies, for example, Zakaria et al. (2012),
Hashemijoo et al. (2012), and Nazir et al. (2010). Also, the controlling variables are
narrowed into the financial indicators because non-financial indicators such as the
economic, political and regulatory changes in the external environment are very hard
to be defined and calculated. Moreover, as mentioned in the research topic, the case
study in the research is also narrowed in the Vietnamese country. Specifically, the
sample to guide the researcher to collect appropriate data is comprised of 67
companies listed in top 100 of the Vietnam stock exchange in five years from 2009 to
2014.
1.8 Structure of the thesis
The thesis consists of five chapters as the standard structure. Apart from this chapter,
there are four remaining ones, which together answer to three problem statements and
respond to the research objectives to finally meet the research topic. Based on the
research scope and background in this chapter, the next one, Literature Review, can
be undertaken smoothly because the list of necessary theories are shown clearly. It
means the second chapter will bring the in-depth understanding on the relevant
theories and the literatures, which are ensured to provide various perspectives on the
impact of dividend policy on the stock price volatility. The aim of this chapter is to
settle the theoretical base for the researcher to apply in the real case study via the
conceptual framework and research hypotheses.
Then, because of the variables found in the second chapter under the scope mentioned
in this chapter, the next chapter, Methodology can select the appropriate methods to
help the researcher measure variables and find data conveniently. The third chapter
aims at justifying how the researcher can complete the study and cope with the

6
possible difficulties to conclude how the findings are reached. After that, the fourth
chapter, Analysis and Findings, is presented to show the discoveries in accordance
with the research topic and research objectives. This chapter is important in the study
because of its most relevancy to the case study while the previous chapters just set the
predictions. As a result, these discoveries are summarized in the last chapter,
Conclusion and Recommendations. In this chapter, the summary and the similarities
along with differences with the literatures are presented. Moreover, it deals with the
limitations and further researches.
1.9 Chapter conclusion
The first chapter has set the next direction for the researcher to follow in reaching the
research topic and meeting the research objectives. The clarity in emphasizing the
research scope and statements of problems is noticeable to show how the researcher
refines the study and justifies the findings. It is the valuable evidences to help the
researcher establish the literature review smoothly. Then, in the next chapter, the
range of theories in the research scope is discussed in detail.

7
CHAPTER 2: LITERATURE REVIEW
In accordance with the set of research scope in the first chapter, the second chapter
aims at interpreting the core principles in the theories relating to dividend policy in
order to understand how the different theories explain the contribution of the dividend
policy to the volatility of the stock price. It defines the relevant concepts in the study,
including the dividend policy and stock price volatility, then discusses the theories
and their applications in empirical tests. Any consistency or inconsistency in the
literatures is implicative to the study to make the conceptual framework and research
hypotheses, which are further tested to meet the requirements in the research topic.
2.2 Relevant concepts in the study
First of all, no research can be completed when the concepts are not defined and still
very ambiguous. It is the reason for the interpretation of the dividend policy and stock
price volatility in the study. The dividend policy is defined as the corporate policy or
strategic decision to determine the percentage of the retained earnings and the amount
of dividend payments from the profits achieved on a regular basis such as quarterly,
monthly and yearly (Hashemijoo et al., 2012). It is also understood as a plan to
distribute the cash to the shareholders or make the shareholders know what amount of
money they will receive from the business outcomes of the company (Arshad et al.,
2013).
In another standpoint, dividend policy acts as an intervention to control the
behaviours of the managers because their interests are completely contrary to those of
the investors (Ullah et al., 2012). While the managers want the high-retained earnings
for new projects and expansion, the shareholders expect to get competitive dividends.
Thus, this policy is also reviewed as the balance between two interests or the way to
minimize conflicts between two relevant contributors. Moreover, almost researchers
suppose that in association with different dividend policies theories, the definition of
this concept is also adjusted appropriately (Hashemijoo et al., 2012; Ullah et al., 2012;
Al- Gharaibeh et al., 2013).
Therefore, this concept can be discussed in different standpoints and aspects in the
next section. Apart from dividend policy, the volatility of stock price refers to the
dynamism of change in the price of the stocks, announced in the stock exchange, over
a certain period of time (Hashemijoo et al., 2012). The increase in the volatility

8
implies the high possibility of the gain and loss from the investment and the increase
in the uncertainty of the future stock price. It is the reason for the investors to expect
the investment in the stocks with low volatility to update the future trend in order to
know whether to retain or sell the stocks that have been purchased (Profilet and
Bacon, 2013).
2.3 Overview of dividend policy theories
Allen and Michaely (2003) and DeAngelo et al. (2009) confirmed that while the
dividend is a popular method to pay for the investment of the investors via stocks, the
motivation on the dividend policy to calculate how amount to be paid is still in the
debate over many centuries. Such debate is easily observed in the various dividend
policy theories, for example, Agency theory, Signalling theory, Bird-in-hand theory
and so on.
According to Ben-David (2010), these theories are classified from the different points
of views, of the classical view, behavioural view, as well as investor and manager
standpoints. Because of the difference in perspectives and interests, the evaluation and
expectation of the dividend policy are also dissimilar. Over time, these theories
evolve from the Bird-in-hand theory in 1951, Dividend irrelevance theory in 1961,
Agency cost theory in 1976 and Signalling theory in 1985 (Franc-Dabrowska, 2007).
Firstly, regarding the bird-in-hand theory, which was established by Graham and
Dodd (1951), the awareness of the investors about the discrepancy between the
current and future values of the dividend is addressed. However, investors are risk-
adverse and they are afraid of the uncertainty in future dividend so they are willing to
pay higher prices for the dividends, which guarantee to offer higher dividends in short
term (Alzomaia and Al-Khadhiri, 2013). In other words, the outside shareholders like
the dividends today rather than future (Rahman, 2015). Thus, the theory aims to
justify why a firm should enlarge the dividend payout ratio for not only attracting the
investors but also increasing the firm value (Deeptee and Roshan, 2009). In relation
with the stock price volatility, the theory represents the dividend relevance attitude. It
says that because the firms need to increase dividend payout ratio, the stock price will
experience a sharp decrease. However, according to Dewasiri and Banda (2014), the
underpinning reasons of the dividend relevance are fallacious.
The second theory is the dividend irrelvance theory, which demonstrates that the
dividend policy has no effect on the stock price volatility (Al- Hasan et al., 2013). It

9
was created by Miller and Modigliani (1961) and supposed that if some certain
assumptions were satisfied, any change in the dividend policy would make no change
to the volatility of the stock price. These assumptions are comprised of the perfect
market, exclusion of tax, rational investors and certain investment policies (Habib et
al., 2012).
To explain, the supporters of this theory argue that the share price varies because of
some extraneous factors and the certain nature of the capital market, instead of the
dividend policies. That means in the perfect market, like supply and demand, share
price moves along with the rate of buying and selling of the stock in the stock
exchange market. But, the problem is that the reality may be not in line with these
above assumptions (Richardson et al., 1986). It may be the reason for the rejection of
this theory in some empirical tests, for example, Richardson et al. (1986) and Al-
Hasan et al. (2013).
In contrary to the dividend irrelvance theory and to expand the accurate evidences on
the bird in hand theory, the tax preference theory, agency cost and signalling theory
belong to the dividend relevancy theories. They are developed to strongly emphasize
the link between dividend policy and the stock price volatility. The link is obviously
justified in these theories because their names clearly address the rejection of the
assumptions in the dividend irrelevancy theory, such as the tax, agency cost and
signalling or bias between management and shareholders. Thus, without the
assumptions, the dividend relevancy theories are dominant.
Regarding tax preference theory, which was created in 1970 by Brenan, there are
some cases, in which the dividends suffer from higher tax than the capital gains or
retained earnings, thus the investors required the firms to offset for the tax
disadvantages via the higher before-tax risk adjusted return on stocks (Dewasiri and
Banda, 2014). After several years, this theory has been updated to suit the reality
(Ambarish et al., 1987). They argued that when the dividends are directly taxed or the
investors certainly reduced their achievements from dividends while retained earnings
are only taxed after stocks are sold, the investors expect to receive the sustainable
profits by investing in retained earnings instead of directly distributing cashes via
dividends (Rafique, 2012). Hence, in contrary to the bird in hand theory, tax
preference theory explains the preference of lower dividend payout ratio. Relating to
the volatility of stock price, this theory reveals the relevancy with the dividend policy,
but does not clarify negative or positive direction.

10
In addition, another dividend relevancy theory is the agency cost theory, which was
created by Jensen and Meckling (1976). The theory notes that the agency cost
increases when the managers act in their own interests instead of the shareholders’
(Amidu, 2007). For example, in some cases, the managers are overconfident that they
are more aware of and knowledgeable to understand which projects are more
profitable to be invested and decide in contrary to the returns of the shareholders
(Ullah et al., 2012). It causes the increase in the agency cost and the possible cases of
the reduction in the returns of the investors (Deeptee and Roshan, 2009). To control
the cost and minimize the risks for the investors, the dividend payout ratio is
calculated (Rozeff, 1982). Then, the dividend policy is a useful tool to monitor to
agency cost, predict the returns of the shareholders and then affects the volatility of
the stock prices (Hooi et al., 2015). To explain, if the agency cost is strengthened, the
volatility increases due to the unresolved conflicts between managers and
shareholders.
Last but not least, the signalling theory is taken into account. It was identified by
Miller and Rock (1985). While the agency cost theory emphasizes the differences in
interests of the managers and shareholders, this theory concentrates on the
information receipt. Certainly, the managers, who control the business and set the
directions for it, will be capable of receiving better and faster information than the
investors (Ullah et al., 2012). Thus, the firms must consider the use of dividend policy
to demonstrate the company prospects (Li and Zhao, 2008). It is also good news for
the firms because the increase in dividend can reveal the increase in stock price. The
reasons come from the expectations of the investors about the firm prospect and the
high returns when holding stocks. Therefore, while the other dividend relevance
theories may show the positive relation between the dividend policy and volatility of
stock price, the signalling theory ensures the stability of the stock price due to the
dividend policy. In other words, dividend policy and share price volatility may
interact negatively with each other.
In brief, the table 1 summarizes the key issues mentioned in the dividend policy
theories.
Dividend
policy
theories
Founders Key issues

Bird-in-hand
theory
Graham and
Dodd (1951)
The awareness of the investors about the
discrepancy between the current and future values
of the dividend
Investors are risk-adverse and they are afraid of
the uncertainty in future dividend so they are
willing to pay higher prices for the dividends,
which guarantee to offer higher dividends in short
term (Alzomaia and Al-Khadhiri, 2013)
Dividend
irrelevance
theory
Miller and
Modigliani,
1961
Firm value is separate from the dividend policy
(Zakaria et al., 2012)
In the perfect market, the dividend policy has no
effect on the stock price (Al- Hasan et al., 2013)
Tax preference
theory
Brenan (1970) Dividends suffer from direct tax while retained
earnings experience indirect or very small tax
(Dewasiri and Banda, 2014)
Then, the investors prefer capital gains in long
term to dividends or the lower dividend payout
ratio (Rafique, 2012)
Agency cost
theory
Jensen and
Meckling
(1976)
Agency cost certainly exists because of the
difference in interests of the managers and stock
owners (Ullah et al., 2012). Managers need the
incomes to be re-invested while the owners expect
higher dividend payments
Dividend policy acts as a necessary method to
reduce agency costs (Rozeff, 1982)
Signalling
theory
Miller and
Rock (1985)
There is a bias in information receipt between
managers and shareholders (Ullah et al., 2012).
Managers receive information first but do not want
to transparently declare it to the stockowners.
Dividend policy is used to transfer information
effectively and announce the future prospects of
the firm (Li and Zhao, 2008)
Source: Summarized by the researcher, 2016
11

12
Table 1: Dividend policy theories
Based on the table 1, it is noticed that the bird-in-hand theory represents the interests
of the investors while signalling theory and agency cost theory mention the
intervention of the managers in determining the dividend policy. Only dividend
irrelevance theory has the objective view on the conditions for the relation between
dividend policy and stock price, focusing on the perfect market and rationality of both
managers and investors.
2.4 Dividend policy and stock market in Vietnam
2.4.1 Dividend policy in Vietnam
Vietnam is appraised as one of emerging markets with many problematic
considerations in the stock industry. The preference between the cash dividend and
stock dividend is still uncertain to the Vietnamese investors. For example, as
consequence of financial crisis, these investors expressed the lesser belief in the
abnormal returns from stocks, and they would like to receive cash (Alphonse and
Tran, 2014). Only when the economy is heated, the stock dividend continues to be
preferable.
It is explained by Nguyen (2012) that the dividend policy in Vietnam is mainly
established from the profitability in positive direction and business risks in negative
relation. That means when the Vietnamese companies achieve higher incomes, their
dividend policy will be better to the investors and during the situations when the risk
is stressful from external environment, more retained earnings for future investment is
necessary. Despite volatility in external factor, Tran and Nguyen (2014) concluded
that dividend policy of Vietnamese companies is stable.
2.4.2 Stock market in Vietnam
In contrast, the stock market in Vietnam is never stable. It is largely influenced from
the global economy and as the emerging market with some issues not regulated well,
many problems occur. In the study of Phan and Zhou (2014), the Vietnamese market
is noticed to be inefficient since the investors are less rational and strongly determined
by the psychological factors such as their personalities and subject feelings and
adjustments. Similarly, the market is not well established and regulated, so, the
efficiency ranks very low.

13
But, it is an implicative fact that the efficiency has been improved gradually over the
last 10 years even though the Vietnamese stock market is still influenced strongly and
positively by the US stock exchange (Luu and Yuan, 2011). That means the
inefficiency in this market is derived from the subjective investment decision and the
large influence of the foreign stock exchange. Once the market is established well to
be independent of other markets in the world and the investors have better knowledge
and skills to understand the market and perform rationally, the Vietnam stock
exchange will be more stable. Such high inefficiency can be a reason for the high
sensitivity of the stock price or its dynamic fluctuation.
2.5 Impacts of dividend policy on stock price volatility
2.5.1 Dividend policy and stock price volatility
In application to the theory of Miller and Modigliani (1961), the significant impact of
dividend policy on stock price volatility requires certain conditions, for example
agency cost and tax. Since such conditions are regular and normal in the stock market,
the prerequisites for the causal link between two variables is taken into account.
Regarding the behavioural theories like signalling and agency cost theory, it is
understood that there are various interventions of the managers in the values to be
received by the investors or shareholders (Li and Zhao, 2008; Ullah et al., 2012).
Because the managers are persons, who propose and decide the dividend policy, their
influences on the stock prices are observed formally via this policy. As a result, in
theory, the impact of dividend policy on stock price volatility is possible in line with
the interactions between the managers and the shareholders.
In the study of Waithaka et al. (2012), the dividend policy is found to link with the
stock price volatility positively via the tax incentives. It means when the tax is higher,
the dynamism in the stock price will be also stronger. The empirical test is supported
by the tax preference theory. However, the main limit in the test is its dependent
object as the stock price, not its fluctuation. Thus, because the dividend policies,
including both dividend payout ratio and dividend yield, are measured via the share
price, it is certain that the policies are influential the share prices.
In contrast, when examining the sample of 139 companies in Kuala Lumpur stock
exchange, both the dividend payout ratio and dividend yield are concluded to link
negatively and statistically with the volatility of the stock price (Hooi et al., 2015).
1% increase in dividend payout reduces the volatility by 1.459% while 1% decrease

14
in dividend yield can leverage the volatility by 0.232%. The study eventually
confirms that under various conditions such as firm size, firm growth and debt
structure, the effects of dividend policy are still strong and not reduce substantially
(Hooi et al., 2015). The result is in line with the finding of Ramadan (2013). It means
when researching 77 companies in Jordan stock exchange, the negative and
significant impacts of dividend yield and dividend payout ratio on share price
volatility are taken into account. The study was eventually considered via four
research models to show the holistic view and in all of four models, the negative links
were captured consistently.
In comparison with these above studies, there remain some empirical tests, which
emphasize the controversy in the impacts of dividend policy on the stock price
volatility (Habib et al, 2012; Lashgari and Ahmadi, 2014). For example, Habib et al.
(2012) explored the case of Pakistan stock exchange and found the positive and
insignificant influence of dividend yield but negative and significant impact of
dividend payout ratio on the share price volatility. However, comparing to the strong
contributions of dividend policies to the volatility in the study of Hooi et al. (2015),
the role of these policies is underestimated in this sample. Similarly, in the literature
of Lashgari and Ahmadi (2014) on 51 companies of Tehran Stock Exchange from
2007 to 2012, the negative and significant impact of dividend payout ratio on stock
price volatility is taken into account. 1% in this ratio leads to 0.242 decrease in the
volatility. The gap in the percentage of influence of this ratio in the study of Hooi et
al. (2015) and Lashgari and Ahmadi (2014) can be explained from the limit of the
second test on few companies, 51 while the first one involved 139 firms. It means the
generalizability of result in the research of Lashgari and Ahmadi (2014) may be lower
than that of Hooi et al. (2015).
Therefore, based on these differences in the above studies, it is evaluated that in the
researches with the holistic view and high generalizability, the result is found
consistently, focusing on the negative and significant impacts of the dividend policies,
via both dividend payout ratio and dividend yield, on the volatility of the share prices.
In contrast, under the conditions, of the small sample size, the findings vary across the
market contexts and between dividend yield and dividend payout ratio. Furthermore,
the concentration on the research objects is the emerging stock exchange market in
developing and emerging economies. The researchers may expect many signals and
results from emerging markets rather than the well-established markets.

15
Besides these above examples, several researches are critically discussed and
summarized in the table 2.
Author/
Year
Independent
variables
Dependent
variable
Controlling
variables
Sample Impact of
dividend policy
on stock price
volatility
Zakaria
et al.,
2012
Dividend
yield,
Dividend
payout ratio
Share price
volatility
Growth, firm
size, Leverage
and earning
volatility
77
companies
in Malaysia
from 2005
to 2010
DPR is positive
and significant
but DY is
insignificant
Hashemi
joo et
al., 2012
Dividend
yield,
dividend
payout ratio
Share price
volatility
Market value,
earning
volatility,
growth
84
companies
in KLSE in
2005- 2010
DY is negative
significantly but
DPR is
insignificant
Al-
Hasan et
al., 2013
Dividend per
share,
Retained
earning per
share
Market
price per
share
28
companies
from 2005-
2009
Positive and
significant
Masum,
2014
Dividend
yield,
retained ratio
Market
price
Profit after tax,
EPS, ROE
Companies
in DSE
from 2007-
2011
Negative and
significant
Lashgari
and
Ahmari,
2014
Dividend
payout ratio
Stock price
volatility
Earning
volatility,
leverage, size
and growth
51
companies
in TSE from
2007 to
2012
Negative and
significant
Nazir et
al., 2010
Dividend
yield,
Dividend
payout ratio
Stock price
volatility
Earnings
volatility,
leverage,
growth and
73
companies
in KSE
from 2003-
DY is positively
significant and
DPR is
negatively

16
size 2008 significant
Ilaboya
and
Aggreh,
2013
Dividend
yield,
Dividend
payout ratio
Share price
volatility
Earnings
volatility, long
term debt,
growth and
size
26 firms in
NSE from
2004- 2011
DY is positively
significant and
DPR is
insignificantly
negative
Source: Summarized by the researcher, 2016
Table 2: Relevant researches on the impact of dividend policy on stock price
volatility
From the table 2, it is addressed that the impact of the dividend policy on stock price
volatility is still indecisive. Some researchers found the negative and significant
impact such as Masum (2014) and Lashgari and Ahmari (2014), some concluded the
positive and significant consequence (Al- Hasan et al., 2013) while almost studies
explored the mixed results or different findings in terms of dividend payout ratio and
dividend yields (Nazir et al., 2010; Zakaria et al., 2012; Hashemijoo et al., 2012;
Ilaboya and Aggreh, 2013). Despite such differences, the only consistency is the
selection of the dependent and independent variables. Almost studies focused on the
stock price volatility as the dependent variable and dividend yield along with dividend
payout ratio as two elements of dividend policies. Nonetheless, there is a limit in the
empirical evidence in the Vietnamese context. Thus, this study can add new findings
to the existing literature.
2.5.2 Other factors affecting stock price volatility
2.5.2.1 Firm size
Apart from dividend policy, other factors affecting stock price volatility are also taken
into account, including, earnings volatility, growth, firm size and leverage. Thus, four
additional factors will be measured and added as the controlling variables in order to
respond to the third research objective. Firm size is considered as the market value of
a firm and because the stock price reflects the profitability and prospects of this firm,
it is reasonable to address the relevancy of the firm size with the stock price volatility
(Nazir et al., 2010). In the table 2, it is commented that almost studies use firm size as
an indicator of the stock price volatility except for the literatures of Masum (2014)
and Al- Hasan et al. (2013).

17
Generally, the impact of firm size on stock price volatility as a controlling variable of
the research model with dividend policies is found inconsistently across various
studies. Some researchers identified the negative role of firm size with the stock price
volatility, for example, research of Hashemijoo et al. (2012) in Kuala Lumpur. These
authors justified the fact that when the firm size is high, it is well established and
regulated and the ability to control the change in the share prices in the stock
exchange is emphasized. Hence, the stock price experiences less volatility. It is
evidence to reflect the potentials of the stocks of large companies since the investors
can enjoy the low risks.
But, other studies found the positive influence of firm size on the price volatility
(Zakaria et al., 2012; Sadiq et al., 2013). When studying 35 firms in Karachi stock
exchange from 2001 to 2011, the firm size is found to be positive to the volatility
(Sadiq et al., 2013). But the researchers confirm the insignificant link. In contrast,
Zakaria et al. (2012) and Ramadan (2013) found the significant and positive impact of
firm size on share price volatility. 1% increase in firm size can result in 0.502%
increase in the stock price volatility (Zakaria et al., 2012). To explain, because the
companies are large, their investment portfolios are diversified and sensitive to the
environment such as the policy change, inflation and economic cycle. Thus, their
stock price fluctuates dramatically to respond to any change in each portfolio and
economic trend.
2.5.2.2 Earnings volatility
Another possible determinant of stock price volatility is the earnings volatility.
Similarly to firm size, this volatility is mentioned in almost researches in the table 2.
The earning volatility refers to the variation in the earnings before tax and interest or
the operating incomes of a firm (Hooi et al., 2015). It is the base to distribute the cash
to the shareholders. If the earning is negative, the dividend will be negative as well.
Thus, the link between earning volatility and stock price volatility is reasonable. It is
expected that the link is positive. And in the study of Hooi et al. (2015), 1% increase
in the volatility of earnings contributes to 0.979% increase in the volatility of stock
price. The high influence rates reveal the significant fact that earnings volatility is a
strong determinant of share price volatility. Similarly, in Karachi Stock Exchange,
Nazir et al. (2012) identified the positive and significant influence of earnings on the
volatility.

18
However, in comparison with 0.979% of Hooi et al. (2015), the relevancy is very
small, just 0.000126, nearly zero. Another empirical test in Malaysian Stock market
of Hashemijoo et al. (2012) noticed the strong influence of earnings volatility when
1% of its increase led to 1.770% increase in the share price volatility. Controversially,
Habib et al. (2012), Ramadan (2013) and Sadiq et al. (2013) concluded that the
earnings volatility have no change on the stock price fluctuation regardless of its
negative or positive link.
2.5.2.3 Growth
Furthermore, company growth is another factor to affect the stock price volatility.
Similarly to other variables, including earnings volatility and firm size, the effects of
growth on stock price volatility are also controversial and inconsistent. In the research
of Sadiq et al. (2013), the growth rate over years of firms listed on stock exchange
market is positive and significant to the share price volatility at 10% level. But,
because the study used the standard significance levels of 5%, the conclusion should
be no relation between firm growth and stock price volatility. With the same result,
Hooi et al. (2015) and Habib et al. (2012) explored the positive, but insignificant role
of the annual growth rate on the stock price volatility. To explain, some evidences are
taken into account. Firm growth is measured via the change in the total asset, so, there
is almost no link between the asset and the dynamics of stock price.
Nonetheless, in the other perspectives, the fast or slow growth rate is implicative to
the degree of fluctuations of the stock price because it affects directly the expectation
of the investors. For example, if the growth is increasing, the investors have reasons
to believe in the future returns on the stocks, thus, they increase their investments,
which ultimately lead to the increase in stock price. However, regarding its volatility,
different studies may show different results. Profilet and Bacon (2013) examined the
financial data of 500 companies trade on the US stock exchange and concluded the
negative and significant influence of the growth on share price volatility. Based on the
result, when the companies grow faster, their stock prices fluctuate less dramatically.
2.5.2.4 Leverage
Last but not least, the researcher considers the possible impact of leverage on the
stock price volatility. Leverage refers to the capital structure of a company, or the
ratio between debt and equity (Tugas, 2012). Since it is relevant to the equity, or the
investment of the shareholders, the link with the stock price is reasonable. In

19
comparison with three above controlling factors, firm leverage implies the fewer
studies. According to Zakaria et al. (2012), the firm leverage significantly relates
negatively with the stock price volatility. It means when the ratio of debt and equity is
enlarged, the volatility in stock price is lowered significantly. It is in line with the
literature of Profilet and Bacon (2013). The negative link in this factor seems to be
almost similar and consistent across empirical tests. But, in the research of Abrar-ul-
haq et al. (2015) and Nazir et al. (2012), the relation of leverage on volatility of stock
price is insignificant.
2.6 Conceptual framework
Conceptual framework is synthesized in the figure 1. It is established from the above
theories and literatures.
Dividend policy:
Dividend yield
Dividend payout ratio
Firm size
Growth
Leverage
Earnings volatility
Stock price volatility
in Vietnam stock
exchange
Source: Synthesized by the researcher, 2016
Figure 1: Conceptual framework
Based on the figure 1, it is commented that there are two key exploratory factors to
emphasize the link of dividend policy with the stock price volatility, including
dividend payout ratio and dividend yield. Apart from two exploratory factors, four
controlling variables are also taken into account, including, firm size, growth,
leverage and earnings volatility. They help enrich and enlarge the research model.

20
2.8 Research hypotheses
In line with conceptual framework, six hypotheses are examined.
H1: Dividend yield significantly influences the stock price volatility
H2: Dividend payout ratio significantly influences the stock price volatility
H3: Firm size significantly influences the stock price volatility
H4: Growth significantly influences the stock price volatility
H5: Leverage significantly influences the stock price volatility
H6: Earnings volatility significantly influences the stock price volatility
In conclusion, the second chapter has discussed the relevant theories, including, bird
in hand, dividend irrelevance, agency cost, signalling and tax preference theories,
along with the previous studies to forecast the relation between the dividend policy
and stock price volatility. It is emphasized that there is no right answer to the question
about the possible influence of dividend policy on stock price volatility. Any answer
should be discovered from the empirical test of the real data in the certain markets.
The reason is that the dividend payout ratio and dividend yield can be found to
influence positively or negatively or insignificantly the stock price volatility. The
same controversy is identified for the controlling variables. Therefore, the next
chapter describes how the researcher directly implements the study to investigate the
role of dividend policy in Vietnam stock exchange.

21
CHAPTER 3: METHODOLOGY
The chapter inherits the results of conceptual framework and research hypotheses
from the second chapter to notice that the relevant variables in the study include
dividend payout ratio, dividend yield, stock price volatility, firm size, growth,
earnings volatility, and leverage. Apart from the concentration on the measurement of
these variables, the chapter aims to deal with the research methods that were used to
collect and analyse data. In other words, it demonstrates the road in which the
researcher came to the final findings in response to the research objectives. Therefore,
it is indispensable to mention the research philosophy, research approach, research
method and ethical considerations.
3.2 Research philosophy
Research philosophy varies between interpretivism and positivism. The interpretivism
reveals the social study on a social phenomenon, which the researcher is a part of, for
example, the suicide, the health care experience and educational process (Goldkuhl,
2012). In contrast, the positivists prefer looking for the scientific research and
consequence of an issue, which is perceived to be independent and objective (Kura,
2012). There is an endless debate between interpretivists and positivists about the
accuracy and applicability of the philosophy in a study. The most suitable answer to
the debate should be the own choice of each researcher depending on the research
objectives and nature of the research object.
Based on the above discrepancy in the belief and attitude of two research
philosophies, it is commented that study should be supported via the positivism
philosophy. Relating to the research aim, the impact of dividend policy on stock price
volatility is important to be addressed. And it is clear that the researcher could not add
the own experiences and feelings about the link to the research results. In other word,
this issue is objective and independent from the researcher. It is only found in the real
Vietnam stock exchange market. Because of this nature, the positivism is suitable.
In addition, according to Scotland (2012), positivism is very useful to help the
researcher investigate into the causal relationship between variables. Or it noticeably
addresses the cause and consequence of an issue while the interpretivism can only
interpret and discuss generally and ambiguously about the link. And because the

22
second and third research objectives aim at discovering the causes of stock price
volatility, another reason for the selection of positivism is taken into account.
Furthermore, the characteristics of the positivism are its objectivity and numeric
involvement in comparison with the critical arguments and ideas in the interpretivism
(Chowdhury, 2014). In the study, the arguments are included in the first objective as
the basis for the data collection and analysis. The two next objectives require the
numerical data on the measurements of stock price volatility, dividend payout and
dividend yield, which are all financial indicators for a firm. Thus, the use of
positivism is accurate in this project. Last but not least, another rationale behind the
choice of positivism is its high generalizability and accessibility to a large sample size
(Scotland, 2012). The research concentrates on the wide market of Vietnam stock
exchange and aims to make recommendations for them in the last research objective.
Thus, the need to access many companies and generalize the results is very important.
3.3 Research approach
In compliance with the positivism, it is compulsory to select the deductive approach
(Kura, 2012). This approach emphasizes the arrangement of the study from the
general theory to the specific study on a certain case while its alternative, the
inductive approach follows the opposite direction, from the various cases in reality to
synthesize the conceptual framework or theoretical framework (Saunders et al., 2012).
In comparison with the structure of the dissertation, it is obviously observed that the
deductive approach underpins the study.
To explain, as found in the second chapter, the conceptual framework, which maps
the relevant concepts and variables together, was established and analysed after a
strong base of theories and literatures are taken into account. Thus, the researcher
does not wait for the collection of facts to synthesize the framework.
Furthermore, in the study, only the case of Vietnam stock exchange is analysed and it
is applied from the dividend policy theories and referred from the previous studies,
such as Nazir et al. (2012), Habib et al. (2012) and Hooi et al. (2015). By employing
the deductive approach, the researcher can get the strong base of theories to underlie
the selection and measurements of variables and rich sources of the relevant studies to
make comparison as well as apply theory to practice effectively and holistically.

23
3.4 Research method
Between quantitative and qualitative methods, the researcher utilizes the quantitative
method because of three reasons. The first one is derived from the prior choices of the
research positivism and deductive approach, which require the research method to be
quantitative instead of qualitative (Saunders et al., 2012). To ensure the smooth flow
of the research methods, it is certain for the researcher to apply quantitative method.
Secondly, as mentioned in the above sections, from the research topic and research
objectives, the numerical data are necessary to be collected. Thus, quantitative
method, which aims to gather the numerical and statistical data (Yilmaz, 2013), is
appropriate in the data collection to fit the research objectives.
Lastly, according to Chrzastowski (2012), the quantitative method gives chance for
the researcher to access large sample, generalize findings and statistically calculate
the causal link between variables while qualitative method only discusses the
variables in in multiple faces and focuses on a limited range of the research objects.
Therefore, the use of quantitative method is expected to help the researcher access
various Vietnamese companies in a period of time to collect necessary data and bring
the statistical estimations for the researcher in analysing them.
3.5 Measurement of variables
3.5.1 Dependent variable
Dependent variable in the research is the stock price volatility. In theory, it is
interpreted as the fluctuations in the stock price over time. According to Mehra
(1998), the volatility occurs day by day and faster than the change in dividend policy.
Despite the regular change in the stock price, the researcher could not measure the
impact of the dividend policy on its fluctuations on the daily or monthly basis because
of the more constant status of the dividend policy. Hence, to explore the effects of this
policy, the larger time is necessary. It is the reason for the calculation of the stock
price volatility on the yearly basis from 2010 to 2014.
The measurement is applied from the literatures of Lashgari and Ahmari, (2014),
Sadiq et al. (2013), Hashemijoo et al. (2012), Zakaria et al. (2012) and Nazir et al.
(2010) and presented as below.
Price volatility (PV) = (1)⁄

24
The highest price and lowest price are observed in each year from 2009 to 2014.
Thus, the first noticeable data to be collected is the range of stock prices of a company
during a year to identify the highest and lowest points.
3.5.2 Independent variables
Independent variables are comprised of dividend yield and dividend payout ratio, as
can be seen from the conceptual framework. They are two elements of the dividend
policy to demonstrate how much the incomes are transferred to the dividend payment
or retained for future investment. The dividend yield (DY) is measured as the ratio of
dividend per share and share price (Sadiq et al., 2013; Hashemijoo et al., 2012). It is
interpreted as a type of measurement of return on investment to see the amount the
investors receive from investment in stocks (Maio and Santa-Clara, 2015). Because it
can reveal the expectation of the investors, it plays an important role to predict the
future stock price (Fama and French, 1988).
And the dividend payout ratio (DPR) is calculated from the ratio of dividend per share
and earnings per share (Sadiq et al., 2013; Hashemijoo et al., 2012). This variable is
similar to the dividend yield, but focuses on the percentages of the income to be sent
to the shareholders via dividend. From these variables, the necessary data consist of
the dividend per share (DPS), share price and earning per share (EPS) of Vietnamese
companies from 2010 to 2014.
3.5.3 Controlling variables
Apart from the key variables in the study, controlling variables consist of firm size,
growth, leverage and earnings volatility. They together with the independent variables
will build the model of stock price volatility. Their measurements are summarized in
the table 3.
Controlling
variables
Measurement References
Firm size (SZ) Natural logarithm of total asset Habib, 2012
Firm growth
(GROW)
Change in asset
{Total asset (year n)- Total asset (year
n-1)}/ total asset (year n-1)
Hussainey et al.,
2011
Leverage (LEV) Total asset/ Long-term debt Zakaria et al., 2012
Earnings volatility Operating income / total asset Ilaboya and Aggreh,

25
(EV) 2013
Source: Measured by the researcher, 2016
Table 3: Measurements of controlling variables
Based on table 3, the required data are comprised of the total asset, total debt, total
equity and operating income. Before the firm growth requires the total asset in the
previous year, it is addressed that for such data, the year 2009 is also observed.
3.6 Data collection
3.6.1 Sampling and sample size
From the above measurements of variables, the participants in the research project are
comprised of the Vietnamese companies listed on Vietnam Stock Exchange. The
researcher decided to pick from the list of top 100 companies currently in the stock
market in this country because it is expected that their financial data are full and they
have participated the stock market for a long time. Because of this criterion on the
research object, the population of the research was identified in advance. Thus, the
noticeable sampling technique is the simple random sampling, which brings the equal
chance of being selected for each company in the population (Onyeka et al., 2013). In
the list of 100 companies, the researcher saw no difference to exclude any of them in
the research. So, simple random sampling is necessary in the case. As a result, after
data collection, final 67 companies in the list were picked. The number represents
67% of the population. They are collected in six years from 2009 to 2014. The last
year is not taken into account because of some missing data and the dividend per
share of one year is regularly exposed in the next year. Thus, to have the dividend per
share of 2015, the researcher must wait for the end of 2016.
3.6.2 Type and source of data
Clearly, the researcher plays no role in the originality of the data, which are mainly
the financial indicators and stock prices of a company. Thus, the type of the collected
data is secondary instead of primary one. The secondary data mean that they are
available in other sources and can be applied by other researchers. They are created
for other purposes than the research objectives. While the firm size, grow, leverage,
earnings volatility, dividend yield and dividend payout can be captured from the
annual report of the selected companies, based on their income statements and
balance sheets, the stock price volatility is collected from the range of various stock

26
prices in a year, thus, it needs a database to summarize all the share prices of a stock
code.
The researcher searched for cophieu68.com and identified that this source was
reliable and sufficient for both the annual report and share prices. In detail, after
logging in, the researcher downloaded the databases of 67 selected companies. For the
file of share prices, the researcher classified them into six years, from 2009 to 2014.
And in each year, the maximum and minimum values of stock price were explored.
Next, the researcher applied the formula 1 to calculate the stock price volatility.
3.6.3 Collection procedure
In general, the range of data to be collected in the research is the average stock price,
highest and lowest price, DPS, EPS, total asset, total equity, total debt and operating
income. Thus, such data can be downloaded from the income statement, balance sheet
and stock market performance of the Vietnamese companies from 2009 to 2014
except for the total asset, which requires the information from 2008 to 2014. 67
companies listed in top 100 Vietnamese stock exchanges are the research objects in
the study. As a result, the total observations are counted to be 402 (for 67 companies
in 6 years). They will be collected via a Vietnamese website, named cophieu68.com.
3.6 Data analysis
The regression model in the study represents the determinants of stock price volatility,
shown as below.
PV= a + b DY+ c DPR+ d SZ+ e GROW+ f LEV+ g EV
In the model, DY and DPR are two key variables to be investigated while four
remaining ones are the controlling variables to increase the accuracy of the regression.
Because this regression addresses both research objectives 2 and 3, its analysis is the
most important step in the data analysis process.
SPSS software will be utilized to undertake different statistical estimations on the
research. Following are some steps to be completed for data analysis:
Descriptive statistics through mean, max, min, standard deviation and so on to
generally describe the set of data
Pearson correlation matrix to demonstrate the possible links among the
variables
Linear regression models to respond to the model of stock price volatility

27
3.7 Ethical considerations
Since the data are all secondary and available transparently in the Internet source as
cophieu68.com to represent the company reports, the engagement of the study with
research ethics is not really serious. The readers or markers can test the accuracy of
the data by comparing them with the available sources. Nonetheless, the most
important consideration for the researcher is the accurate presentation of the data and
information from secondary source in the dissertation. So, it is guaranteed that any
data to be used in the statistical measures are completely in line with the company
data.
In conclusion, the third chapter has described the way for the researcher to collect and
analyse the appropriate data for the findings on the impacts of dividend policy on the
stock price in the Vietnamese companies listed on Vietnam stock exchange. It is
noticed that the researcher used the positivism, deductive approach and quantitative
method for the sample of 67 companies in the top 100 in the Vietnam stock exchange
via the simple random sampling technique. In association with the random sampling,
it is expected that the findings are reliable and objective without any bias from the
priority in a certain company or the selection of undesirable methods.

28
CHAPTER 4: ANALYSIS AND FINDINGS
The fourth chapter presents the outputs of the statistical estimations from the SPSS
software as mentioned in the previous chapter, including, descriptive statistic, Pearson
correlation matrix, and linear regression. They aim to demonstrate the impact of
dividend policy on stock price volatility. While the first objective is met in the second
chapter, the two next research objectives will be responded clearly in this chapter. In
association with three steps of data analysis, in the previous chapter, there are also
three sections in the fourth chapter in addition to the discussion, which applies the
results with the theories, compares with the other studies and explains why the results
are captured like that.
4.2 Descriptive statistics
4.2.1 Output of SPSS software
The descriptive statistics are undertaken via the mean, max, min and standard
deviation. Each element implies the certain results on the set of data collected from 67
Vietnamese companies in top 100 companies of Vietnam stock exchange. They are
revealed in the table 4.
N Minimum Maximum Mean Std. Deviation
PV
DY
DPR
EV
SZ
LEV
GROW
Valid N
(listwise
)
398
384
391
402
402
378
401
360
.026697000
.000008865
-12.345679010
-.245770296
9.387354087
.0000876062
-.5440094090
17.829457360
.909090909
54.545454550
.611122588
17.064726940
.8820062510
5.0751139000
.74067588691
.12511631959
2.15341258715
.08061093503
12.89320358754
.276794399942
.180805107873
1.123509467962
.127112831558
5.524119051935
.091237516780
1.610682032271
.2569872943421
.4035431870127
Source: Output of SPSS software, 2016
Table 4: Descriptive statistics of variables in the study
From the table 4, it is noticed that in the range of 402 expected data for each variable,
the missing data are still identified for the variables, DY, PV, DPR, LEV and GROW

29
to result in the total valid number of data as just 360. But, 360 is still sufficient for the
reliable analysis of the data in SPSS software. Thus, the first comment in the set of
data is the sufficiency and reliability of the further results.
4.2.2 Stock price volatility
Firstly, in term of stock price volatility, based on the range from minimum to
maximum value, it is identified that the volatility rate can vary between 0.027 and
17.83. In average, the dynamism of stock price is addressed at 0.7407. That means the
gap between the highest and lowest share price is averagely equal to 74.07% of the
average number of two price ranges. The increase in this percentage reflects the
increase in the stock price volatility or instability of the share price in the stock
exchange.
In comparison with the previous studies, it is commented that the emerging markets
experience the higher volatility in the share price, for example, 65.92% in Malaysia in
the study of Hashemijoo et al. (2012), and 81.3% in Pakistan in the research of Habib
et al. (2012) while it is really lower in the developed countries, such as UK, at only
29.4% in the literature of Hussainey et al. (2011).
Thus, the average rate of share price volatility in Vietnam in this study is in line with
other emerging stock exchange while contrary to the developed countries, in which
the stock market is well established and regulated. The characteristic of emerging
stock exchange is fully reflected from the significant standard deviation,
approximately 1.124, which refers to the significant dispersion with the mean. As a
result, the sample in Vietnam reveals fully the features of an emerging stock market.
4.2.3 Dividend policy
Secondly, regarding dividend policy, which is measured via dividend yield and
dividend payout ratio, the average yield is 0.125 and the payout ratio is 2.153 in
average. Two measurements are similar in term of dividend per share (DPS), but
dividend yield concerns with it as percentage of share price while dividend payout
ratio calculates it as the percentage of earnings per share (EPS) (Sadiq et al., 2013;
Hashemijoo et al., 2012). Thus, to interpret, in the sample of 67 Vietnamese
companies from 2009 to 2014, DPS accounts for 12.5% of share price while it is
equal to 215.3% of the earnings per share (EPS). That means in average, Vietnamese
companies pay their preferred shareholders the money higher than the profits they get

30
on each share, but the total money is just worth 12.5% of the share price announced
on the stock market.
In previous studies, while the emerging markets perceive the very low value of
dividend per share on the share price in comparison with the earnings per share, for
example, just 3% in the study of Hooi et al. (2015) and 2.36% in the research of
Habib et al. (2012). In contrast, the value received by the investors for each stock in
the developed countries is very high, 311.97% of share price (Hussainey et al., 2011).
But, this value is just less than a half of the earnings of the companies each stock.
The Vietnamese companies have the similar feature with these emerging markets
from the very low dividend per share in comparison with the share price. But, they
pay too much on the standard of their profits and it is opposite to almost other stock
exchange. The problem is that if the Vietnamese companies send too much to the
shareholders, eventually higher than the profits on each stock, the retained earnings
for the future investment may be lowered.
4.2.4 Other characteristics of 67 Vietnamese companies
Lastly, concerning the controlling variables, which generally describe the sample in
its size, growth rate, earnings volatility and leverage, there are some comments that
67 companies in the sample are large in size with large variation, and the growth rate
is generally slow and they almost focus on equity instead of debt. To explain, based
on the table 4, the earnings volatility is just 0.0806 in average, it means the operating
income in general just accounts for 8.06% of total asset. The highest earning volatility
is 61.11% while the min is negative. That refers to the case, in which the company
suffers from loss.
Furthermore, the average size is large because of the high mean of SZ as 12.89, which
means the total asset of the Vietnamese companies will be e^13.66 in average.
However, the variation is substantial with the standard deviation of 1.61, mentioning
that the sizes vary 161% around the mean.
In association with the large firm size, the growth rate is also significant, and it
annually increases by 18.08%. Such figures are reasonable because the selected
companies in the sample belong to top 100 Vietnamese companies listed in Vietnam
stock exchange. But, it does not mean that all companies achieve the positive growth
rate. The existing min value is -0.544, which mentions the reduction in total asset in

31
the next year. Hence, the sample includes both the growth and recession in the
business cycle of these companies.
Moreover, since the mean of LEV is 0.2768, on average, 67 Vietnamese companies
listed in top 100 obviously prefer equity to debt to financing the firm. In detail, the
total debt is just 27.68% of the total asset. The range from min to max leverage ratio
is found in the table 4 proves that all 67 companies in six years from 2009 to 2014
lowered debts and appreciated investment from shareholders. The maximum leverage
is 88.20%. Then, such figures emphasize that the Vietnamese companies are afraid of
or unfamiliar with the using of debts due to the credit risks. In the study of Gweyi and
Karanja (2014), the increase in debt to equity ratio is associated positively with the
return on equity and profitability. Thus, the finding in Vietnamese companies seems
opposite or reflects something new about the capital structure. But, when relating to
other studies, it is noticed that the similarity is identified. Almost companies in the
other studies biased their capital structure toward equity (Hussainey et al., 2011;
Habib et al., 2012; Hooi et al., 2015).
In brief, after analysing the descriptive statistics of seven variables in the study, some
discoveries on the Vietnamese companies in top 100 from 2009 to 2014 are taken into
account. The first one is the instability in the stock price, the second one is the very
high payment to the shareholders in comparison with the real income on each share.
While the first finding reflects the Vietnam as an emerging stock exchange as a
whole, the second one adds new feature to this industry. They tend to satisfy the
shareholders’ interests too seriously. Then, the last discoveries consist of the large
firm size, high growth rate and concentration on equity to finance the business.
4.3 Pearson’s correlation matrix
4.3.1 Output of SPSS software
Pearson’s correlation matrix aims at describing the correlations between variables in
terms of their trends together and the extent of the influences (Harring and Wasko,
2011). The researchers use this step for some research intentions, for example the
examination of the association of the variables, the test of multicollinearity or the
evidence to forecast the significance of the regression (Gadermann et al., 2012).
According to Mukaka (2012), the absolute value of Pearson r should be higher than
0.3 for the existing relation of two variables together. The range from -0.3 to 0.3

32
reveals the negligible association. In detail, the rule of thumb to interpret the Pearson
correlation is shown in the table 5.
Source: Mukaka, 2012, p.
Table 5: Rule of thumb to interpret Pearson correlation
The table 5 is implicative for the researcher to evaluate the output of SPSS software
and predict how the dividend policy and controlling variables affect the stock price
volatility in Vietnam stock exchange. After running correlation in the statistical
program, the result is presented in the table 6.
PV DY DPR EV SZ LEV GROW
Pearson
Correlation
PV
Sig. (2-tailed)
N
Pearson
DY
Correlation
Sig. (2-tailed)
N
Pearson
DPR
Correlation
Sig. (2-tailed)
N
1 **
.180 **
.155 -.061 -.029 *
.131 .148**
.000 .002 .224 .569 .011 .003
398
.180**
.000
384
.155**
.002
387
384
1
384
.266**
.000
383
387
.266**
.000
383
1
391
398
-.286**
.000
384
-.186**
.000
391
398
-.321**
.000
384
-.180**
.000
391
374
.252**
.000
362
.176**
.001
369
397
-.054
.292
383
.043
.401
390

33
Pearson
EV
Correlation
Sig. (2-tailed)
N
Pearson
SZ
Correlation
Sig. (2-tailed)
N
Pearson
LEV
Correlation
Sig. (2-tailed)
N Pearson
Correlation
GROW
Sig. (2-tailed)
N
-.061
.224
398
-.029
.569
398
.131*
.011
374
**
.148
-.286**
.000
384
-.321**
.000
384
.252**
.000
362
-.054
-.186**
.000
391
-.180**
.000
391
.176**
.001
369
.043
1
402
.258**
.000
402
-.326**
.000
378
*
.110
.258**
.000
402
1
402
-.441**
.000
378
.035
-.326**
.000
378
-.441**
.000
378
1
378
**
.154
.110*
.027
401
.035
.490
401
.154**
.003
377
1
.003 .292 .401 .027 .490 .003
397 383 390 401 401 377 401
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Table 6: Pearson’s correlation matrix of variables in the study
4.3.2 Forecasting the factors significantly affecting stock price volatility
From the table 6, it is identified that only two factors do not relate significantly with
the stock price volatility at 5% level of significance, including EV and SZ. Then, the
dividend policy has significant effect on the volatility in terms of both dividend yield
and dividend payout ratio. In the second column of the table 6, the Pearson r between
DY and PV is 0.18, between DPR and PV is 0.155. Comparing with the rule of thumb
in the table 5, both values are too small and they predict the negligible relationship of
dividend policy with the volatility. Nonetheless, sig. (2-tailed) confirms that both DY
and DPR correlate significantly with PV at 5% level. Pearson r also reveals the
positive link, in other words, when DPR and DY increase, the trend of increasing is
also found for the stock price volatility.
Apart from dividend policy, earnings volatility and firm size are not significant to
associate with the stock price volatility and both correlate negatively with this
dependent variable. Even though LEV and GROW are significantly influential, their
Pearson r is still lower than 0.3. That means despite significant association, these
variables make little change to the share price volatility. But, with the Pearson

34
correlations are 0.131 and 0.148 for LEV and GROW respectively, both factors link
positively with the volatility of the share price. It is interpreted that when the debt to
equity ratio and growth rate increase, the share price fluctuates more dramatically. In
general, the selected factors in the study are critical determinants of the share price
volatility.
4.3.3 Associations of exploratory variables
Another benefit of the Pearson’s correlation matrix is its holistic view on the
correlations between factors, not limiting to just the dependent variable. Certainly,
from the table 6, apart from the association of the exploratory variables with share
price volatility, their relevancies are also taken into account. While dividend payout
ratio is affected by almost remaining factors except for growth rate, dividend yield
links with other factors except for earnings volatility and firm size. But, the
associations are still small, except for the link between DY and SZ, which is -0.321.
To interpret, from these correlations, the dividend yield or the ratio of DPS and share
price increases when the leverage and growth increase. It means if the companies seek
for higher debts in comparison with equity, the dividend as percentage of share price
will be improved better. Similarly, when the total asset increases and the operating
income as percentage of total asset is improved, the dividend is motivated to increase.
However, there is an insignificant and negative flow between the firm growth and
dividend payout ratio, which increase or decrease contrarily.
In brief, the Pearson’s correlation matrix has demonstrated the relevancy between
variables in the study. If the regression is in line with these findings, the dividend
policy will have a significant effect on the volatility of the stock price. The volatility
is further impacted by the controlling variables, including, leverage and firm growth
rate positively.
4.4 Linear regression model
4.4.1 Model without the controlling variables
The regression model responds to the prediction from the Pearson’s correlation
matrix. The first model is the simplest one without any controlling variables, which
describe the financial characteristics of a company. That means the first model
examines the link of dividend policy on stock price volatility in their genuine
relationships under no other conditions. The table 7 presents the F-test on the whole

35
research model and because the Sig. of the entire model is 0.00, which is lower than
0.05, the whole model is significant.
Model Sum of Squares df Mean Square F Sig.
Regression
Residual
Total
22.186 2 11.093 8.874 .000b
475.037 380 1.250
497.223 382
a. Dependent Variable: PV
b. Predictors: (Constant), DPR, DY
Table 7: F-Test of the entire research model with exploratory factors as DPR
and DY
Since sig. is small enough to ensure the significant link between the dividend policy
and stock price volatility, it is assessed that the model seems to immediately reject the
dividend irrelevance theory (Al-Hasan et al., 2013). The detailed coefficients and sig.
are shown in the table 8.
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. Collinearity
Statistics
B Std. Error Beta Tolerance VIF
(Constant)
DY
DPR
.520 .081 6.445 .000
1.339 .467 .149 2.869 .004 .929 1.076
.024 .011 .115 2.212 .028 .929 1.076
Table 8: Regression model with exploratory factors as DPR and DY
Both sig. are 0.004 and 0.028 for DY and DPR respectively. So, the researcher can
confirm that the dividend yield and dividend payout ratio have significant interaction
with the stock price volatility. From the Beta, both independent variables influence
the share price volatility positively. It means their trends in the stock exchange market

36
are all similar. The result actually follows the result from the Pearson’s correlation
matrix. Because of positive and significant relationship of dividend policy on share
price volatility, the case study of 67 companies listed on Vietnam Stock Exchanges is
in line with the theories of dividend relevance theory, focusing on bird-in-hand theory
and agency tax theory, which confirm the positive relation between dividend policy
and stock price volatility (Hooi et al., 2015). It rejects completely dividend irrelvance
theory and partially signaling theory, which supposes negative relationship between
dividend policy and price volatility (Li and Zhao, 2008).
Additionally, the accuracy of the output is strengthened when no collinearity is found
in the research model. VIF is very small, equal to 1.076, which is smaller than 10.
Moreover, R-Square is calculated to be 0.045, it means 4.5% of variation in stock
price fluctuation is determined by dividend policy.
4.4.2 Model with controlling variables
The second research model examines how the dividend policies have impacts on the
stock price volatility under other conditions, including the firm size, growth rate,
earnings volatility and leverage ratio. While the F-Test in the first model is high, it is
very small in the second research model. Thus, the second model is significant or it
confirms that at least one independent variable in the model relates significantly with
the stock price volatility. The F-test is revealed in the table 9.
Model Sum of Squares df Mean Square F Sig.
Regression
Residual
Total
36.563 6 6.094 4.694 .000b
458.300 353 1.298
494.863 359
b. Predictors: (Constant), GROW, DPR, SZ, EV, DY, LEV
Table 9: F-Test of the entire research model with exploratory factors of DPR,
DY and controlling factors
Obviously, in the table 9, sig. is smaller than 0.05, hence, the researcher can believe
that some variables in the research model are reliably determinants of the share price
volatility. The coefficient of each exploratory variable is presented in the table 10.

37
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. Collinearity Statistics
B Std. Error Beta Tolerance VIF
(Constant)
DY
DPR
EV
SZ
LEV
GROW
-.207 .591 -.350 .726
1.385 .511 .154 2.708 .007 .812 1.232
.022 .011 .106 1.973 .049 .909 1.100
-.278 .771 -.021 -.360 .719 .783 1.277
.044 .042 .063 1.059 .291 .752 1.329
.352 .280 .077 1.257 .210 .699 1.432
.495 .191 .140 2.584 .010 .890 1.124
Table 10: Regression model with exploratory factors as DPR, DY and controlling
factors
From the table 10, stock price volatility in Vietnamese companies is strongly
influenced by the dividend policy and firm growth since the sig. on them are all
smaller than 0.05. In comparison with such strong correlations, remaining controlling
variables have no impact on the share price volatility. Then, the first comment is that
with or without conditions, the dividend policy still remains its positive influence on
the stock price volatility. The finding is similar to almost literatures, for example,
Hooi et al. (2015), Lashgari and Ahmadi (2014), Ramadan (2013) and Habib et al.
(2012), who at least found significant impact of one measure of dividend policy on
the share price volatility. Thus, this discovery is in line with the findings from other
researches, both from the emerging and developed countries. Hence, dividend
relevance theories are again confirmed in case of 67 Vietnamese companies.
Apart from the relevancy of the dividend policy, firm size does not significantly affect
share price volatility since its sig. is 0.291>005. That means the stability of stock
price should not be considered based on size of a firm. It is the reason why some
investors prefer investing in the large companies, but some see potential from small
firms. The result is not in line with the literatures of Hussainey et al. (2011), Ramadan
(2013), Habib et al. (2012) and Hooi et al. (2015). Similarly, the impact of firm
leverage on stock price is insignificant. It means if the companies increase or decrease
the use of debts, the share price fluctuation is not affected. However, this result is

38
contrary to the researches of Zakaria et al. (2012), Nazir et al. (2012) and Profilet and
Bacon (2013).
In terms of two other controlling variables, the earning volatility is irrelevant to the
share price volatility since its sig. is 0.719, higher than 0.05. But, their relevancy is
negative. That means the earnings volatility and stock price volatility go in the
contrary directions, but the change in operating income as percentage of total asset is
not significant to lead to the change in the share price movement. The discovery is
contrary to the researches of Hashemijoo et al. (2012) and Hooi et al. (2015), but in
line with the literatures of Habib et al. (2012), Ramadan (2013) and Sadiq et al.
(2013).
In contrast, the growth rate of the Vietnamese companies links positively and
significantly with the share price volatility. If the Vietnamese companies experience
1% increase in the growth rate, the share price volatility will be improved by 0.495%.
It is then discussed that the companies’ growth rate leads to the large volatility in the
share price in the stock exchange market. The finding is supportive to the studies of
Profilet and Bacon (2013), but different from the literatures of Profilet and Bacon
(2013), and Hooi et al. (2015).
In comparison with the significance of the second research model, the role of six
exploratory variables in the stock price volatility is small. It is shown via the R Square
in the table 11.
Model R R Square Adjusted R
Square
Std. Error of the
Estimate
1 .272a
.074 .058 1.139430104255
a. Predictors: (Constant), GROW, DPR, SZ, EV, DY, LEV
Table 11: Summary of model with exploratory factors as DPR, DY and
controlling factors
From the table 11, because R is 0.272, it demonstrates the weak correlation between
the variables in the model and the stock price volatility. Then, R Square is 0.074.
Thus, if the exploratory factors, such as firm size, firm growth and leverage, changes,
they can explain 7.4% variations in the volatility of the share price. In comparison
with previous model, there is an increase in R-squared, from 4.5% to 7.4%. That

39
means adding variables help the researcher explain the change in stock price volatility
better.
4.4.3 Variations of research model across six years
Last but not least, the researcher tests any difference in the results of the regression
model over six years, from 2009 to 2014. The significances and coefficients of six
factors with the share price volatility are shown in the table 12.
2009 2010 2011 2012 2013 2014
DY -1.122 2.058** 0.838 7.983** -0.555 -0.177
DPR 0.093 -0.062 -0.027 0.036 0.063 0.004
EV -1.332 -0.154 -0.969 1.53 -1.186 -0.022
SZ -0.029 0.03 0 0.202 0.133 0.014
LEV -0.137 -0.037 0.244 1.423 0.974 0.274**
GROW 0.491 0.579** 0.434 1.346 0.264 0.029
R Square 0.133 0.486 0.128 0.253 0.138 0.183
Source: Adapted from output of SPSS software, 2016
Table 12: Variation of regression model across six years
From the table 12, the majority of the years prove the irrelevancy of the dividend
policy with the share price volatility in short-term. Only in 2010 and 2012, the
dividend yield is found to correlate positively and significantly with the share price
volatility. For dividend payout ratio, no year the model concludes the relationship
between dividend policy and share price volatility.
Another remarkable discovery is that over the last six years, the movements of share
price volatility along with the dividend policies fluctuate dramatically. For example,
dividend yield negatively links with the volatility in 2009, but turns positive in 2010.
Therefore, based on the table 12, it can be clearly confirmed that the impacts of
dividend policy on the stock price volatility in 67 Vietnamese companies are
inconsistent and uncertain in short-term. This result can be used to prove the
instability in the Vietnam stock exchange market. Not only the dividend policies but
other financial conditions also link dramatically with the share price volatility. For
example, the earnings volatility relates positively with the share price volatility in
2009 and 2014, but correlate negatively in the remaining years.

40
As a result, dividend policy has no relation with stock price volatility in short-term
but its impacts are much important in long-term. Increasing dividend payout and
dividend yield results in increase in fluctuation of share price.
4.5 Hypothesis testing
Generally, the results of hypotheses testing of the study are synthesized in the table
13.
Hypotheses Result Supporting
literatures
Contrary
literatures
Theory
H1: Dividend
yield
significantly
influences the
stock price
volatility
Accepted Hooi et al. (2015),
Lashgari and
Ahmadi (2014),
Ramadan (2013)
and Habib et al.
(2012)
Dividend
relevance
theories:
Bird-in-
hand
theory and
agency tax
theory
H2: Dividend
payout ratio
significantly
influences the
stock price
volatility
Accepted Hooi et al. (2015),
Lashgari and
Ahmadi (2014),
Ramadan (2013)
and Habib et al.
(2012),
H3: Firm size
significantly
influences the
stock price
volatility
Rejected Sadiq et al. (2013) Hussainey et al.
(2011), Ramadan
(2013), Habib et
al. (2012) and
Hooi et al. (2015)
H4: Growth
significantly
influences the
stock price
volatility
Accepted Sadiq et al. (2013) Hooi et al. (2015)
and Habib et al.
(2012)
H5: Leverage
significantly
influences the
Rejected Abrar-ul-haq et al.
(2015) Nazir et al.
(2012)
Profilet and Bacon
(2013) Zakaria et
al. (2012)

41
stock price
volatility
H6: Earnings
volatility
significantly
influences the
stock price
volatility
Rejected Habib et al. (2012),
Ramadan (2013)
and Sadiq et al.
(2013)
Hashemijoo et al.
(2012) and Hooi et
al. (2015)
Source: Synthesized by the researcher, 2016
Table 13: Hypotheses testing in the research
4.6 Discussion
To discuss, the principles of the dividend relevance theories can help the researcher
argue the findings from the Vietnam stock exchange clearly. It is noticed that in this
sample, any dividend relevance theory such as agency cost, tax preference and
signaling theory can be used to justify Vietnamese case. Thus, based on them, the
stock market in Vietnam is much affected or associated with agency cost, tax and
information bias (Miller and Modigliani, 1961). It is true because the perfect market
without tax and agency cost is obviously not provided in the Vietnamese stock
exchange. The finding is similar to any result in the literature. It means there is a
consistency in the finding from this research with other previous studies.
The relevancies of the dividend policies, focusing on bird-in-hand and agency theory
with the positive influence of dividend policy on share price volatility, demonstrate
that the Vietnamese companies can use their policies to either stabilize or increase
fluctuation in their stock prices. They could not then monitor them. In relation with
the studies of Hussainey et al. (2011) and Hashemijoo et al. (2012), the irrelevancies
signal remarkable evidence about the weak capabilities of the Vietnamese companies
in managing the stock exchange while bird-in-hand theory explains that the
companies themselves can decide how much stock price volatility can be. For
example, while the UK and Malaysian companies can increase their dividend yield
and payout ratio to lower the volatility of the share prices. In application, it is
confirmed that Vietnamese companies are capable of controlling the price fluctuation.
To explain, as found in many studies, the Vietnam stock exchange is largely
influenced by the external forces such as economic cycle and other stock markets

42
such as US and the investors are mainly based on their subjective feelings of the stock
market instead of rational evidences (Luu and Yuan, 2011; Nguyen, 2012; Phan and
Zhou, 2014). Thus, the investors have no powers to determine potentials of a
company then invest in it, they just focus on how much profit they will receive from a
stock by relying on dividend policies given by the companies. Such irrational feelings
create the strong power of dividend policies in determining the change in the stock
price. In application of bird-in-hand theory, it is noticed that even though Vietnamese
companies have power and capability to affect stock market by applying new or
adjusting dividend policies, the risk is very high. Once the policy becomes wrong, the
companies might collapse in its stock market.
Conclusively, the fourth chapter recognizes some characteristics of Vietnam stock
exchange. Some are similar to other emerging markets, for instance, the high
volatility of share price, the higher dividend payout ratio than dividend yield and the
focus on equity rather than debt. Besides, there are some distinctive features,
including, the seriously high dividend per share as percentage of earnings per share.
Generally, dividend policy is confirmed to influence significantly and positively the
stock price volatility. Then, the underlying theory in this case is dividend relevance
theory, focusing on bird-in-hand and agency tax theories.

19

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