The Moderating Effect of Market Uncertainty on Dividend Policy and Stock Price Volatility

This study investigates the moderating effect of market uncertainty on the relationship between dividend policy and stock price volatility among listed firms in Nigeria. Using a balanced panel of 152 firms over a ten-year period, the study applies a fixed-effects regression model with robust and clustered standard errors to control for firm-specific heterogeneity and econometric violations. The results show that dividend policy significantly reduces stock price volatility, while market uncertainty exerts a strong positive effect on volatility. Most importantly, the interaction between dividend policy and market uncertainty is negative and statistically significant, indicating that dividend payments become more effective in stabilizing stock prices during periods of heightened uncertainty. Firm size and profitability reduce volatility, whereas leverage increases it, while growth opportunities show no consistent effect. Extensive post-estimation diagnostics and robustness checks confirm the validity and stability of the findings. The study concludes that dividend policy serves as a strategic signaling and risk-management tool in uncertain market environments. It calls on corporate managers to adopt stable and transparent dividend policies, urges investors to incorporate dividend behavior into risk assessment, and encourages regulators to promote payout transparency as a mechanism for enhancing stock market stability in Nigeria.