Dividend policy is one of the most important element to measure changes in stock
prices. The relationship between dividend policy and stock price volatility shows
different results based on different studies. This paper focuses on the relationship
between dividend policy and stock price volatility through seminal literature on both
theoretical and empirical evidences from 1989 to 2016. The various consequences of
this relationship depend upon each country specific characteristics, different data
sample and different methodology techniques which utilized by researchers in
developed and developing countries. Most of the studies found negative relationship
between dividend policy and stock price volatility, while developed countries have
more impact on this relationship as compared to developing countries. Based on the
prior literature, this paper argues that the relationship between dividend policy and
stock price volatility is inconsistent and the organization needs to decide the dividend
policy according to their capability and organizational culture.