ContentsChapter 1: Research Overview 31.
1 Introduction 31.2 Background of the study 31.2.1 Dividend Policy in Malaysia 31.3 Problem Statement 41.
4 Research Objectives 51.4.1 General Objective 51.
4.2 Specific Objectives 51.5 Research Questions 51.6 Scope of study 51.7 Significance contribution of study 51.8 Limitation of study 5Chapter 2 Literature Review 62.
1 Dividend Theory 62.1.1 Agency Theory 62.1.2 Signalling Theory 62.
1.3 Bird in Hand Theory 62.1.4 Pecking Order Theory 62.
2 Review of Literature 62.2.1 Dividend Policy & Leverage 62.2.2 Dividend Policy & Liquidity 62.
2.3 Dividend Policy & Profitability 62.2.4 Dividend Policy & Growth Opportunities 62.
2.5 Dividend Policy & Corporate Taxation 62.2.
6 Dividend Policy & Firm Size 62.3 Hypotheses Development 62.4 Research Framework 6Chapter 3: Research Design Methodology 73.1 Sample Selection 73.1.
1 Population 73.1.2 Sampling Technique 73.1.
3 Sample 73.2 Data Collection Method 73.3 Description of Variables 73.
3.1 Independent Variable: Leverage 73.3.2 Independent Variable: Liquidity 73.3.3 Independent Variable: Profitability 73.
3.4 Independent Variable: Growth Opportunities 73.3.5 Independent Variable: Corporate Taxation 73.3.6 Dependent Variable: Dividend Policy 73.
3.7 Control Variable: Firm Size 73.4 Data Analysis 73.4.1 Descriptive Analysis 73.4.
2 Normality Test 73.4.3 Correlation Analysis 73.4.4 Multicollinearity 73.
4.5 Multiple Regression 7References 8?Chapter 1: Research Overview1.1 IntroductionDividend decision referring to decision in deciding the amount or portion of earnings to be distributed to the shareholders as a dividend as well as decide the amount to be retained by the company. Dividend distribution could be seen as a form of reward to the shareholders due to their willingness in financial investment contribution to the company, hence this method of reward could fulfil their objective in maximising their interest. On the other hand, the level of investment opportunities will help the company in deciding the amount of earnings to be retained.
Therefore, it is possible for the companies to develop and manage an optimum dividend policy divides the earnings into dividend and retained earn¬ings. Dividend policy is “the practice that management follows in making dividend pay out decisions or, in other words, the size and pattern of cash distributions over time to shareholders” (Yusof & Ismail, 2016). In decade, dividend decisions raise financial issue and it is one of the top ten complex matters in finance, due to its expressive effect towards investment and financial decision (Thirumagal & Vasantha, 2016). Yusof & Ismail (2016) expressed that the companies would be relied and depends more on debt or other external financing method in the case if the companies pay extremely high dividend, since it would result in less retained earnings to finance the future profitable project or investments. In contrast, the company’s dependence on the external financing would be reduce if the companies decide to pay fewer dividend, indicate that the company will have more internal earnings for future project plans.
The evolution of dividend policy has been started by Litner (1956), in which introduce with the Litner Model. 1.2 Background of the study1.
2.1 Dividend Policy in MalaysiaBursa Malaysia website (2018) has been provided with guidance on setting Dividend Policy for public listed companies in Malaysia in which can be considered by the companies in managing company’s level of dividend’s payment. The factors that mentioned in was including the level of availability of liquidity in the companies, return on equity (ROE) and retained earnings of the companies, as well as companies levels of capital expenditure and plans on other investment, if any.
1.3 Problem StatementWhile Bursa Malaysia (2018) has provided the public listed companies in Malaysia with the guidance on factors to be considered for dividend policy decision, Focus Malaysia (2017) however highlighted that Malaysian public listed companies seem not show their interest in maximizing shareholder’s wealth, since they do not even establish with their dividend policy in explaining the cash dividend levels to pay as a percentage of their net yearly earnings. Even there are many empirical research on determinants of dividend policy around the world either in developed economies or in emerging economies, however, there are no general consensus factors that can be considered for dividend policy decision (Mui & Mustapha, 2016).
In other words, there is no dividend policy can be familiarly accepted and hence, managers in the company will find it difficult in deciding the distribution of cash dividend to the shareholders. Thus, this study aims to examine which determinants could influence dividend policy decision among public listed companies in Malaysia. This study tends to fill in the gap through extending the study done by the previous empirical research on determinants of dividend policy in Malaysia context by using the recent years’ data as well as in adding additional factors of Corporate Tax in determining dividend policy. ?1.4 Research Objectives The research objectives in this study was based on the problem above along together with the additional factors of Corporate Tax in determining dividend policy.
1.4.1 General Objective To examine factors that influence the Dividend Policy decision among Malaysia public listed companies. 1.4.2 Specific Objectives• To examine whether leverage has significant relationship with dividend policy.
• To examine whether liquidity has significant relationship with dividend policy.• To examine whether profitability has significant relationship with dividend policy.• To examine whether investment opportunities has significant relationship with dividend policy.• To examine whether corporate tax has significant relationship with dividend policy.1.5 Research Questions The following research questions were addressed to gain and seek understanding the factors that influence Dividend Policy of Malaysia public listed companies.
• Does leverage has significant relationship with dividend policy?• Does liquidity has significant relationship with dividend policy?• Does profitability has significant relationship with dividend policy?• Does investment opportunities has significant relationship with dividend policy?• Does corporate tax has significant relationship with dividend policy?1.6 Scope of study1.7 Significance contribution of study1.8 Limitation of study?Chapter 2 Literature Review2.1 Dividend Theory 2.1.
1 Agency TheoryAgency theory views that the relationship was exist in link between the manager as an agent and owner as a principal. The relationship exist when the shareholder, who is the owner of wealth in the company engaged the agent to manage and control the wealth on their behalf. The principal-agent relationship has created a problem that the agent are not share the same interest as principal, hence conflict of interest problem arise. The principal and manager’s interest may be diverged, since agent seem the acceptance of the agent status give them opportunity in maximize their own interest and utility. The principal need to incur cost in monitoring the behaviour of the agent, so that the agent will act in the best interest of the principal.
This cost incurred by the principal known as agency cost. Since separation of ownership and control between principal and agent will rise the agency cost bear by the principal, therefore, dividend policy is one of the alternative that was believed in reducing agency cost (Mui & Mustapha, 2016).