Does the Frequency of Dividends Reduce Stock Price Volatility?

A study has revealed that, among Korean publicly‑listed companies, those that pay dividends more frequently tend to exhibit lower systematic risk. According to a report released by the Korea Financial Research Institute in May 2026, firms that have been paying dividends semi‑annually or quarterly displayed markedly lower betas than firms that paid dividends only annually across several analytical models.

The report examined 10,715 companies listed on KOSPI and KOSDAQ from 2010 to 2024. Using a unbalanced panel data set comprising 10,715 company–year observations, the authors applied OLS panel regressions, difference‑in‑differences, and propensity‑score matching techniques. Based on three theoretical hypotheses—information‑efficiency theory, transaction‑cost theory, and investment‑period theory—the authors tested whether higher dividend‑frequency is associated with lower betas, eventually concluding that semi‑annual and quarterly dividend payers indeed have significantly smaller betas than annual payers.

In particular, the study found that in the more information‑intensive KOSDAQ market, the beta of a quarterly‑dividend firm was even lower. This suggests a negative relationship between dividend‑frequency and systematic risk. While the authors interpreted the relation statistically, they noted that quarterly‑dividend firms account for only 0.6 % of the total sample, so the findings should be regarded as “statistical evidence” rather than definitive proof. Nevertheless, even after controlling for dividend frequency, the negative correlation between beta and systematic risk remained, indicating that dividend‑frequency can function independently as a corporate policy variable.

From a policy perspective, the report suggested that strengthening the regulatory environment—such as enhancing tax incentives, easing capital‑market regulation, and encouraging dividend‑frequency expansion—could be an effective measure. The authors proposed ways to reinforce market stability and governance through dividend‑frequency adjustments, incentive schemes, and firm‑level governance assessment, including dividend‑frequency disclosures.

The study did not establish a causal link between dividend‑frequency and systematic risk; further verification is needed, and researchers should consider each company’s financial condition, industry characteristics, and market environment in aggregate.