Dividend policy and payout ratio: evidence from the Kuala Lumpur stock exchange

ISSN： 1526-5943

Source： The Journal of Risk Finance Incorporating Balance Sheet, Vol.8, Iss.4, 2007-08, pp. : 349-363

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Abstract

Purpose ‐ The purpose of this research is to identify the variables with an expected influence on dividend policy and on payout ratio in an emerging market. Design/methodology/approach ‐ Based on the literature, eight hypotheses were developed and tested using 300 firms randomly selected from the Kuala Lumpur Stock Exchange. Additional statistical analyses were presented. Findings ‐ The results suggest that current dividends are affected by their pasts and their future prospects. To a lesser extent dividends were associated with net earnings. Payout ratios (POR) were not found to have a strong effect on the company's future earning growth, but had some significant negative correlation with the company's leverage. Cash per share and share book value significantly and positively affect both DPS and POR. Practical implications ‐ The findings of the study might be of interest to academicians and practitioners. Originality/value ‐ This paper explores the dividend policy and the payout ratio of listed companies in a fast-growing market that has received inadequate research attention. The paper thus adds to the body of accounting knowledge.