The Determinants of Corporate Dividend Policy in Malaysia: An Empirical Evidence

Yu-Fun, Eoon (2012) The Determinants of Corporate Dividend Policy in Malaysia: An Empirical Evidence. [Dissertation (University of Nottingham only)] (Unpublished)

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The dividend policy is one of the most debated topics in the corporate finance world. Black (1976) famously quoted “The harder we look at the dividend picture, the more it seems like a puzzle, with pieces that just don’t fit together”. Even after an extensive amount of research done by academics from all over the world, there is no uniformity in their answers to what determines the corporate dividend policy of a firm.

In Malaysia, there have been a few studies on Malaysian firms, but they are a limited number. This dissertation carries out the purpose of finding the determinants of the corporate dividend policy in Malaysian firms. The main purpose of this study is to determine if there is a relationship between a number of factors with the companies’ dividend payout ratios. The second purpose is to examine if there are differences in the impact of the company selected factors on the three major industries in Malaysia. Therefore, in this dissertation, a few dividend policy theories and previous studies regarding the determinants of corporate dividend policy have been reviewed. Based on the literature, five company selected factors were chosen to test the relationship between dividend payout ratio and the five selected factors: profitability, risk, market-to-book ratio, sales growth and cash flow.

The data used in this dissertation are secondary data, extracted from Thomson Reuter’s Datastream 2.0. A period of six years of data was collected. This dissertation follows a quantitative research method and it is based on three dividend theories: dividend signaling theory, residual dividends theory and the free cash flow hypothesis. In order to examine the empirical evidence of the determinants of dividend policy in firms in Malaysia, a panel analysis and cross sectional analysis have been carried out. In addition, multicollinearity tests and also hypothesis testing have been conducted.

The results indicate that the Malaysian firms follow the dividend signaling theory and free cash flow hypothesis. The only variable that deviated from the previous literature was the market-to-book ratio.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 20 Jan 2015 13:36
Last Modified: 21 Mar 2022 16:10

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