CHAPTER THREEMETHODOLOGY Introduction Themain purpose of this chapter is to conceptualize the research study on thebasis of selected variables from the literature review. In this chapter, the researchermakes an attempt to develop a theoretical framework based on literature reviewand decide the analyzing tools which are used to analyze the data. This chapterexplains the definitions of the variables and operationalization of the study.
Finally, the latterpart of the chapter describes the validity and reliability of the study which is used to measure the research problem. Conceptual framework Independent Variables 1. Dividend yield 2. Dividend Payout Control Variables Share price 1. Firm Size 2. Growth in assets 3. Long term debt Depended Variable Population and sample of the study All the 291 Listed companies in Colombo Stock exchange Sample Population Selected 50 companies using simple random sampling method PopulationThe population of the study is the all the companieslisted on Colombo stock exchange.
Approximately 291 companies can be taken as the population which included 20business sectors. SampleThe sample included 40 companies listed in CSE which havedividend announcements before 2017/11/15. The simplerandom sampling method was used to select the sample using MS excel and”RAND” function. After allocating random value for each company the list wassorted ascending order. First 40 companies have been selected as the sample.All the first 40 companies not included because some companies do not pay a dividendin my observed time period.
Therefore, when the researcher met a company which does not pay divided, it is rejected andselected the next company which pays a dividend for their customers. Time periodconsists 2 years of the period from 2013to 2017 which mean Panel data are used in this research. The data is being directly collected fromannual reports which have been uploaded to Colombo stock exchange website(CSE). Data collectionAs above mentioned The research is based on annualreports which uploaded to CSE. that meansthe research mainly based on secondary data.
Definition of variables DependedVariableShare price volatility (SP)This is the Depended variable of the study. The increase or decreasein Share price will affect changes in investor’s emotions in the marketplace. When calculated share pricevolatility firstly found the mean of the share price. That mean sum of openingand closing share prices divided by two. After that to find the share price volatility deducted the beginningof the year share price from the end ofthe year share prices divided by beginning of the share price. The formula isbellow IndependentvariablesDividendYield (DY)Thisis the first independent variable of the study. It can be expressed as thedividend per share as a percentage of share price. It is calculated by using dividend per share(excluding tax credit) dividedby share price in the market.
The figures were obtained directly fromthe annual report which is uploaded to CSE website. Black and Scholes, (1974) also argue thatthe best method for testing the effects of dividend policy on stock prices isto test the effects of dividend yield on stock returns. Dividend PayoutRatio (DP)Thisis the second independent variable of the study. It is able to express as the ratio of dividend per share as apercentage of earning per share. It is calculated by using dividend per share(excluding tax credit) divided by earning per share.
Here earning per share iscalculated by using profits after tax (PAT) divided by a number of ordinary shares issued by the firm. The figures were obtained directly fromthe annual reports which are uploaded to CSE website. ControlVariables FirmSize (FS)Thisis the first control variable in thestudy.
Total assets are used as a proxyfor size. The figure for this variable was directly obtained from the annual reports which are uploaded to CSE website. Long-term debt (LD)Thisis the second control variable of the study. Thefigure for this variable wasdirectly obtained from the annual reportswhich are uploaded to CSE website. Thisrepresents all interest-bearing financialobligation excludingamounts due within one year e.g. debentures, mortgages, and loans with amaturity greater than one year.
Growthin Assets (GA)Thisis the third control variable in thestudy. The figure for this variable was directly obtained from the annual reports which are uploaded to CSE website. The growth rate for each year was calculated by taking the ratio of thechange in the total asset at the end ofthe year to the level of the total assetat the beginning of the year.