determinants of dividend yield of malaysian firms

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  • DETERMINANTS OF DIVIDEND YIELD OF MALAYSIAN FIRMS

    Teresa Liew Phit Sia

    HG 4026

    L722 Corporate Master in Business Administration

    2011 2011

  • .flusat Khidmal Maklum [Aku em . !lJNlVERSm MALAYSIA SARAWAK

    p.KHIDMAT MAKL.UMAT AKADEMIK

    111111111 ~i'~ii 111111111 1000246507

    DETERMINANTS OF DIVIDEND YIELD OF MALA YSIAN FIRMS

    TERESA LIEW PH IT SIA

    A dissertation submitted in partial fulfillment of the requirements for the degree of Corporate Master in Business Administration

    Faculty of Economics and Business

    UNIVERSITI MALAYSIA SARA W AK

    2011

  • APPROVAL PAGE

    I certify that I have supervised and read this study and that in my opinion it conforms to the acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a research paper for the degree of Corporate Master in Business Administration.

    Dr. Mohammad Jais Supervisor

    This research paper was submitted to the Faculty of Economics and Business, UNIMAS and is accepted as partial fulfillment of the requirement for the degree of Corporate Master in Business Administration.

    Professor Dr. Shazali Abu Mansor Dean, Faculty of Economic and Business UNIMAS

    11

  • DECLARATION OF COPYRIGHT

    Name ' : Teresa Liew Phit Sia

    Matric Number : 08031512

    I hereby declare that this research is the result of my own investigation, except where otherwise stated. Other sources are acknowledged by footnotes giving explicit references and a bibliography is appended.

    Signature

    Date

    Copyright by Teresa Liew Phit Sia and

    Universiti Malaysia Sarawak

    111

  • ACKNOWLEDGEMENT

    I.

    -Author would like to express a sincere appreciation to the supervisor, Dr Mohammad Jais, for his patient, guidance and helpful criticisms towards the completion of this research paper. A special thank is also extended to the Dean and all the staffs of Faculty of Economics and Business.

    IV

  • ABSTRACT

    (:hiS study focuses on the perfonnance of 788 finns over a 10-year period from year 2000 to 2009 that provide infonnation on market capitalization, net income, tota~ assets, total common equity, net operating cash flow, the earning per share and the date the finn was first listed on Bursa Malaysi, The result of statistics summary provide support to the previous studies that Malayslan dividend payers are more profitable, having higher net operating cash flow and investment opportunities but lower debt equity ratio than the non-payers. The result of Logit regression shows that profitability has the strongest positive influence, debt equity has moderate negative influence and cash flow has mild positive influence on the probability of dividend yields. Investment opportunities have been found with no significant contribution. The influence of the financial variables on dividend yield varies when finns are examined within the context of size and age of finns. The only exception here is profitability which consistently shows positive influence and its impact increases across size and age of finns.

    v

  • ABSTRAK

    Kajian ini tertuju kepada pencapaian 788 finna-finna sepanjang tempoh sepuluh (10) tahun, iaitu dari tahun 2000 sehingga tahun 2009 di mana makIumat mengenai nilai pasaran, pendapatan bersih, jumlah aset, jumlah ekuti umum, aliran tunai bersih dari operasi, pendapatan atas saham serta tarikh finna mula tersebut di Bursa Malaysia adalah tersedia ada. Keputusan yang diperolehi dari ringkasan statistik menyokong kajian-kajian terlebih dahulu bahawa pembayar dividen di Malaysia adalah lebih beruntung, mempunyai aliran tunai bersih dari operasi serta peluang pelaburan yang lebih tinggi, tetapi nisbah ekuti hutangnya adalah lebih rendah berbanding dengan finna-finna yang tidak membayar dividen. Keputusan regresi logit menunjukkan bahawa keuntungan mempunyai pengaruh positif yang paling kuat, ekuti hutang mempunyai pengaruh negatif yang serdehana dan aliran tunai mempunyai pengaruh positif yang lemah ke atas kebarangkalian hasil dividen, sedangkan peluang peIaburan didapati tidak mempunyai pengaruh yang ketara. Pengaruh dari pembolehubahpembolehubah kewangan terhadap hasil dividen berubah-ubah ketika finna-finna diteliti mengikut kontek dari segi saiz serta umur finna. Satu-satunya pengecualian di sini adalah keuntungan dimana ianya sentiasa tetap menunjukkan pengaruh positif dan kesannya bertambah mengikut saiz serta umur finna-finna.

    VI

  • Pusat Khidmat Maklumat AkaderraJ< UNIVERSm MALAYSIA SARAWAK

    T ABLE OF CONTENTS

    APPROVAL PAGE. . .. ... . ..... . .. . .. . .. ... . .. . .. . .. . .. . .. . .. . .. . ........ . .. . ... ......... 11

    DECLARATION OF COPYRIGHT PAGE.. ......... ...... ..... ... ............ .... ... 111

    ACKNOWLEDGMEN .................... ............................................... IV

    ABSTRACT ................................................................................ V

    TABLE OF CONTENTS. . ..... . .. . .. ... . .. ... ...... ... ...... ... ........ . . .. . .. .. . ....... Vll

    LIST OF FIGURES ................................... .. ................. . ................ IX

    LIST OF TABLES. . .. . .... . . .. . ......... .. . .. . .. ....... .. . .. ...... . .. . .. . .. .... .. . ... . ..... X

    APPENDIXES ...................... .. ...................................... ... ........... . Xl

    CHAPTERl

    INTRODUCTION............ . ................ ............... ... ................... . ...... 1

    CHAPTER 2

    LITERATURE REVIEW. ..... ... . . .. . .. . .. . .. . .. . ..... ......................... .. . .. . .. .. 4

    CHAPTER 3

    RESEARCH METHODOLOGY

    3.1 Data Collection Procedure. . .. . ..... . ... .. ... ... . .. ... . .. .... .. ... ... ... . .... .... . . 13

    3.2 Selection of Variables ........................................ .. ................. ... 14

    3.3 Condition of Data .................................... . .............................. 17

    3.4 Method of Analysis............... .. ........ ..... ............ ... ................. .... 18

    Vll

  • CHAPTER 4

    FINDINGS

    4.1 Comparison between Dividend payers (DP) and Non-dividend payers (NDP) 21

    4.1 .1 Profitability... . ..... . ..... ..... ..... ...... .... ..... ......... ... ................ ............ 23

    4.1.2 Investment Opportunities. . .. . .. . .. ...... . . ....... . . .. .. .. ....... . ... . .. ...... 24

    4.1.3 Debt Equity........ ...... . . .......... .......... . ....... ....... ... ............ .. ... 26

    4.1.4 Cash Flow... . . ..... . . .... . . . . ... .. . .. . ............... .. . ...... .. . .. . .. . ..... ... . . 28

    4.2 Comparison within Dividend payers with regards to size and age of firms 31

    4.2.1 Characteristics of Dividend payers by size... .. ...... .. ...... . ............. 33

    4.2.2 Characteristics of Dividend payers by age...... . . . .... .. . . ..... . ..... . ..... 35

    4.3 Result of Logit Regression . . .. ...... .. ..... ....... . ...... . ..... . ........ .. .... .. ... 37

    CHAPTERS

    CONCLUSION AND RECOMMENDATION

    5.1 Summary .. ."................. ......... . .. ........... .. .... .. ........ .. ............ . ... 13

    5.2 Recommendation . ...... . .... .... .... . . . ...... ...... . . . . . .... . .... .. . ....... ....... .. 14

    REFERENCE 45

    Vlll

  • LIST OF FIGURES

    Figure 1 Dividend Yield (Dividend Payout/Share Price) of Dividend paying firms 2000 to 2009 .......... . ... .. . ... . ..... ......... .. . . .. .. ......... . . .. . 22

    Figure 2 Profitability (NIIITA) - Mean and Median of Dividend and Non-dividend paying firms 2000 to 2009 .... .. .. ...... .. ..................... 23

    Figure 3 Investment Opportunities (CIA) - Mean and Median of Dividend and Non- dividend paying firms 2000 to 2009 .............................. 24

    Figure 4 Debt Equity (TD/CE) - Mean and Median of Dividend and Non-dividend paying firms 2000 to 2009 ..................................... 27

    Figure 5 Cash Flow (NOCF/A) - Mean and Median of Dividend and Non-dividend paying firms 2000 to 2009 . . .. . ..... . .. ................. . ...... 28

    Figure 6 Market Earning Growth (CEPS) - Mean and Median of Dividend and Non- dividend paying firms 2000 to 2009 ............ .. .. ........ .... .. 29

    IX

  • LIST OF TABLES

    Table 1 Dividend Yield (Dividend Payout/Share Price) of Dividend paying

    firms 2000 to 2009 ...................... . . . ... .. ............... . .............. 22

    Table 2 Profitability (NIIT A) - Mean and Median of Dividend and Non-

    dividend paying firms 2000 to 2009 . ....................................... 23

    Table 3 Investment Opportunities (CIA) - Mean and Median of Dividend and

    Non-dividend paying firms 200 to 2009 .. ................. .. ............ ... 24

    Table 4 Debt Equity (TD/CE) - Mean and Median of Dividend and Non-

    dividend paying firms 2000 to 2009 ............... .. ....................... 27

    Table 5 Cash Flow (NOCFIA) - Mean and Median of Dividend and Non-

    dividend paying firms 2000 to 2009 ...... . ................................. 28

    Table 6 Market Earning Growth (CEPS) - Mean and Median of Dividend and

    Non-dividend paying firms 2000 to 2009 .......... . ....................... 29

    Table 7 Characteristics of Dividend Payers within the context of size and age

    offirms . .. . . .............. ... . .............. .... . . . ........................... ... 32

    Table 8 Percent of small, medium and large Dividend Payers against the four

    tinancial va

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