Pierre Erasmus
Professor, Stellenbosch University, South Africa.Divided Volatility and Share Returns:
South African Evidence
Although extensive research on the effect of dividend payments on
share returns has been conducted, contrasting results are often
reported. This study investigates the relationship between the volatility
of a firm’s cash dividend payments and its share returns for a sample of
South African firms listed in the industrial sector of the Johannesburg
Stock Exchange. In order to reduce survivorship bias, both those firms
that remained listed during the period under review, as well as those
firms that delisted are included in the study. The study period of 1989
to 2010 covers a period during which the South African economy
experienced a number of profound changes, and it therefore provides
the ideal backdrop for this type of study. The results of the study
should indicate to external analysts and investors what effect the
stability of cash dividend payments have on the performance of a firm’s
shares.