The Determinants of Dividend Policy: Evidence from Malaysian Firms

The Determinants of Dividend Policy: Evidence from Malaysian Firms

The aim of this study is to investigate the relationship between dividend payout ratio in Malaysian firms with profitability, size, growth opportunities, free cash flow, business risk and market to book value. The paper used a sample of 284 firms listed on the Kuala Lumpur Stock Exchange (KLSE) from...

Full description

Saved in:
Bibliographic Details
Main Author: Issa, Ayman I.F.
Format: Thesis
Language:eng
eng
Published: 2012
Subjects:
HG Finance
Online Access:https://etd.uum.edu.my/3212/1/AYMAN_I.F.ISSA.pdf
https://etd.uum.edu.my/3212/3/AYMAN_I.F.ISSA.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
id my-uum-etd.3212
record_format uketd_dc
institution Universiti Utara Malaysia
collection UUM ETD
language eng
eng
advisor Saha, Asish
topic HG Finance
spellingShingle HG Finance
Issa, Ayman I.F.
The Determinants of Dividend Policy: Evidence from Malaysian Firms
description The aim of this study is to investigate the relationship between dividend payout ratio in Malaysian firms with profitability, size, growth opportunities, free cash flow, business risk and market to book value. The paper used a sample of 284 firms listed on the Kuala Lumpur Stock Exchange (KLSE) from seven sectors viz., Consumer Products, Industrial Products, Construction, Finance, Technology, Properties, and Telecommunication. In order to decipher the relationships as stated above, multivariate regression analysis is used to test the hypotheses. The study found that at the pooled data level for All sectors, free cash flow, return on assets, return on equity, earning per share, market to book value and market capitalization have significant positive correlation with dividend payout ratio. The variable Beta,however,has a strong negative correlation with dividend payout ratio. The findings however differ from sector to sector; results reflect that Market capitalization; Beta, ROA and ROE are the common variables which have influence on DPR across various sectors except in technology sector where as the variable Market capitalization is not significantly associated with DPR. Similarly, ROA, which is significant determinant variable of DPR in four sectors like Construction,Consumer Products, Properties and Telecommunication Sector,it has no influence on the dividend payout ratio of the companies in the Industrial, Technology and Finance sectors.
format Thesis
qualification_name masters
qualification_level Master's degree
author Issa, Ayman I.F.
author_facet Issa, Ayman I.F.
author_sort Issa, Ayman I.F.
title The Determinants of Dividend Policy: Evidence from Malaysian Firms
title_short The Determinants of Dividend Policy: Evidence from Malaysian Firms
title_full The Determinants of Dividend Policy: Evidence from Malaysian Firms
title_fullStr The Determinants of Dividend Policy: Evidence from Malaysian Firms
title_full_unstemmed The Determinants of Dividend Policy: Evidence from Malaysian Firms
title_sort determinants of dividend policy: evidence from malaysian firms
granting_institution Universiti Utara Malaysia
granting_department Othman Yeop Abdullah Graduate School of Business
publishDate 2012
url https://etd.uum.edu.my/3212/1/AYMAN_I.F.ISSA.pdf
https://etd.uum.edu.my/3212/3/AYMAN_I.F.ISSA.pdf
_version_ 1747827522101313536
spelling my-uum-etd.32122016-04-19T07:44:40Z The Determinants of Dividend Policy: Evidence from Malaysian Firms 2012-06 Issa, Ayman I.F. Saha, Asish Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance The aim of this study is to investigate the relationship between dividend payout ratio in Malaysian firms with profitability, size, growth opportunities, free cash flow, business risk and market to book value. The paper used a sample of 284 firms listed on the Kuala Lumpur Stock Exchange (KLSE) from seven sectors viz., Consumer Products, Industrial Products, Construction, Finance, Technology, Properties, and Telecommunication. In order to decipher the relationships as stated above, multivariate regression analysis is used to test the hypotheses. The study found that at the pooled data level for All sectors, free cash flow, return on assets, return on equity, earning per share, market to book value and market capitalization have significant positive correlation with dividend payout ratio. The variable Beta,however,has a strong negative correlation with dividend payout ratio. The findings however differ from sector to sector; results reflect that Market capitalization; Beta, ROA and ROE are the common variables which have influence on DPR across various sectors except in technology sector where as the variable Market capitalization is not significantly associated with DPR. Similarly, ROA, which is significant determinant variable of DPR in four sectors like Construction,Consumer Products, Properties and Telecommunication Sector,it has no influence on the dividend payout ratio of the companies in the Industrial, Technology and Finance sectors. 2012-06 Thesis https://etd.uum.edu.my/3212/ https://etd.uum.edu.my/3212/1/AYMAN_I.F.ISSA.pdf text eng validuser https://etd.uum.edu.my/3212/3/AYMAN_I.F.ISSA.pdf text eng public masters masters Universiti Utara Malaysia Aivazian,V., Booth,L.,& Cleary,S. (2003).Do emerging market firms follow different Dividend policies from U.S. firms? Journal of financial research, 3,371-387. Al-Kuwari,D. (2010). Large Shareholders, Agency Theory and Dividend decision in Emerging Markets. Working Paper, University of Qatar. Al-Malkawi,H.A.N. (2007).Determinants of Corporate Dividend policy in Jordan: An Application of the Tobit Model.Journal of Economic & Administrative Sciences, 13(2),44-70. Al-Najjar,B., & Hussainey,K. (2009).The association between Dividend payout and outside.Journal of Applied Accounting Research, 10,4-19. Adjaoud,F., & Ben-Amar,W. (2010).Corporate Governance and DividendPolicy: Shareholders’ Protection or Expropriation? Journal of Business Finance & Accounting, 37,648–667. Allen,F., & Michaely,R. (2002). Payout Policy. Unpublished manuscript, The Wharton Financial Institutions Center. Allen,F., Bernardo,A.E., & welch,I. (2000). A theory of Dividend based on Tax Clienteles. The journal of finance, 6, 2499-2535. Adil,C.M., Zafar N., & Yaseen N. (2011).Empirical Analysis of Determinants of Dividend payout: Profitability and Liquidity. Interdisciplinary Journal Of Contemporary Research In Business, 3(1)289-300. Appannan S. & Sim,L.W. (2011), A Study on Leading Determinants of Dividend policy In Malaysia Listed Companies for Food Industry under Consumer Product Sector, 2nd International Conference On Business And Economic Research. (pp. 945-976). Al Shabibi,B.K., Ramesh,G. (2011).An Empirical Study on the Determinants of Dividend policy in the UK. International Research Journal of Finance and Economics, 80,106-120. Amidu,M. & Abor,J. (2006).Determinants of Dividend payout ratios in Ghana. Journal of Risk Finance, 7(2),136-145. Benartzi,S., Michaely,R. & Thaler,R. (1997). Do changes in dividend signal the future or the past. The Journal of Finance, 52(3),1034-1007. Baker,H.K., & Powell,G.E. (2000). Determinants of Corporate Dividend Policy: A Survey of NYSE Firms. Financial Practice and Education, 10(1),29-40. Baskin,J. (1989). Dividend policy and the Volatility of Common Stock. Journal of Portfolio Management, 15(3),19-25. Bhattacharya,S. (1979). Imperfect information, Dividend policy and "the bird in the hand" fallancy.The Bell Journal of Economics, 10(1),259-270. Chay,J.B. & Suh,J. (2005), Cross-Sectional Determinants of Dividend Payments:International Evidence, Sungkyungkwan University and Ewha Womans University,Working Paper. DeAngelo,H., & DeAngelo,L. (2006).The irrelevance of the MM Dividend irrelevance theorem. Journal of Financial Economics, 79(2)293–315. DeAngelo,H., DeAngelo,L.,& Skinner,D.J. (2004).Are diviends disappearing? Dividend concentration and the consolidation of earnings. Journal of Financial Economics, 72(3),425–456. D’Souza J. & Saxena A.K. (1999). Agency cost, market risk, investment opportunities and Dividend policy – an international perspective.Managerial Finance, 25(6),35-43. Easterbrook,F.H. (1984). Two Agency-Cost Explanations of dividend. The American Economic Review, 74(4),650-659. Eriotis,N. (2005).The Effect Of Distributed Earnings And Size Of The Firm To its Dividend Policy: Some Greek Data. International Business & Economics Journal, 4(1),67-74. Gordon,M.J. (1963).Opitmal investment and financing policy. The journal of finance, 18(2),264-272. Gill,A., Biger N., & Tibrewala R. (2010). Determinants of Dividend payout Ratios: Evidence from United States. The Open Business Journal, 3,8-14. Guizani,M. & Kouki,M. (2012). Ownership-Control Discrepancy and Dividend Policy.International Business Research, 5(1), 127-139. Glen, Jack D., Karmokolias,Y., Miller R.R. & Shah,S.(1995), Dividend policy and Behavior in Emerging Markets,Discussion Paper No. 26, (International Financial Corporation). Higgins,R.C.(1972).The corporate dividend– saving decisions. Journal of Financial and Quantitative Analysis,7(2),1527-41. HO,H. (2003).Dividend Policies in Australia and Japan. International Advances in Economic Research, 9(3),91-100. Holder,M.E., Langrehr,F.W., & Hexter,J.L. (1998). Dividend policy Determinants: An Investigation of the Influences of Stakeholder Theory. Financial Management, 27(3),73-82. Imran,K. (2011).Determinants of Dividend payout Policy: A Case of Pakistan Engineering Sector. The Romanian Economic Journal, 14(41),47-60. Jun,A., Gallagher,D.R., & Partington,G.H. (2006). An Examination of Institutional Dividend Clienteles: Evidence from Australian Institutional Portfolio Holdings. Un- published manuscript, University of Sydney, The Capital Markets Co-operative Research Centre. Jensen,G.R., Solberg,D.P., & Zorn,T.S. (1992).Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies.The Journal of Financial and Quantitative Analysis, 27(2),247-263. Jensen,M.C. (1986).Agency costs of free cash flow,corporate finance, and takeovers. American Economic Review, 76(2), 323-329. Jensen,M.C. & Meckling,W.H. (1976). Theory of the Firm: Managerial Behavior,Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4),305-360. Juhmani,O.I.H. (2009). Determinants Of Dividend payout Policy: Evidence From Bahraini Firms. Journal of International Finance and Economics, 9(2),77-86. Ji-ming,L., & Zhao-hua W. (2009). An Empirical Study of the Relationship Between Corporate Dividend policy and Financial Performance of Chinese Listed Companies. ISECS International Colloquium on Computing, Communication, Control, and Management, 190-193. Jiraporn,P. (2004),“Dividend Policy, Shareholder Rights,and Corporate Governance Provisions”, Working Paper. Texas A&M International University. Jiraporn,P., Kim J. & Kim,Y. (2008), Dividend policy and Corporate Governance Quality, Working Paper. Pennsylvania State University. Kalay,A. (1982). The Ex-Dividend Day Behavior of Stock Prices: A Re-Examination of the Clientele Effect. The Journal Of Finance, 37(4),1059-1070. Kapoor,S. (2006).IMPACT OF DIVIDEND POLICY ON SHAREHOLDERS’ VALUE: A STUDY OF INDIAN FIRMS. Unpublished manuscript, Jaypee Institute of Information Technology, Noida India. Kowalewski,O., Stetsyuk,I. & Talaver,O. (2007).Do corporate governance and ownership determine Dividend policy in Poland. Financial Market and Institutions, 60-86. La Porta,R., Lopez-De-Silanes,F., Shleifer,A. & Vishny R.W. (2000).Agency Problems and Dividend policy around the World .Journal of Finance, 55(1),1-33. Lloyd,W.P., Jahera,J.S. & Page,D.E. (1985).Agency Costs and Dividend payout.Quarterly Journal of Business and Economics, 24(3),19-29. Lintner,J. (1956).Distribution of Incomes of Corporations Among dividends, Retained Earnings, and Taxes. The American Economic Review, 46(2),97-113. Ling,F.S., Mutalip,M.L.A., & Shahrin,A.R. (2008). Dividend Policy: Evidence From Public Listed Companies In Malaysia. International Review of Business Research Papers, 4(4),208- 222. Moh'd,M.A., Perry,L.G.,& Rimbey,J.N.(1995).An Investigation of the Dynamic Relationship between Agency Theory and DividendPolicy. Financial Review, 30(2),367-385. Mehta,A. (2012). An Empirical Analysis of Determinants of Dividend Policy: Evidence from the UAE Companies. Global Review of Accounting and Finance, 3(1),18–31. Miller,M.H., & Modiliani,F. (1961).Dividend Policy, Growth, and the Valuation of Shares.The Journal of Business, 34(4), 411-433. Mollah,S., K.Keasey, and H.Short, (2002).The Influence of Agency Costs on Dividend policy in an Emerging Market: Evidence from the Dhaka Stock Exchange, Working Paper. Miller,M.H., Rock,K. (1985). Dividend policy under Asymmetric Information. The Journal of Finance, 40(4), 1031-1051. Mohamed,N., Hui,W.S., Omar,N.H., AbdulRahman R., Mastuki,N. ,AbdulAzis,M.A. & Zakaria,S. (2012).Empirical Analysis Of Determinants Of Dividend Payment: Profitablity And Liquidity.Unpublished manuscript,Universiti Teknologi MARA, Accounting Research Institute & Faculty of Accountancy, Selangor, Malaysia. Nassir,A.M., & Mohamad,S. (1993). The Dividendand earnings behavior of firms on the Kuala Lumpur StockExchange. Pertanika Journal of Social Sciences and Humanities, 1(2),171-177. Naceur,S.B., GOAIED,M. & Belanes,A. (2006 ). On the Determinants and Dynamics of dividend. Working paper. Osman,D., & Mohammed,E. (2010). Dividend policy in Saudi Arabia. The International Journal of Business and Finance Research, 4(1),99-113. Omran,M. &, Pointon,J. (2004). Dividend Policy, Trading Characteristics And Share Prices: Empirical Evidence From Egyptian Firms. International Journal of Theoretical and Applied Finance, 7(2),121-131. Okpara,G.C. (2010). A Diagnosis of the Determinant of Dividend Pay-Out Policy in Nigeria: A Factor Analytical Approach. American Journal of Scientific Research, 8,57-67. Rozeff,M.S. (1982). Growth, Beta and Agency Costs as Determinants of dividend.The Journal of Financial Research, 5(3),249-259. Shleifer,A., & Vishny R.W. (1997).A Survey of Corporate Governance.The Journal of Finance, 52(2),737-783.

Similar Items