FIRM PERFORMANCE AND DIVIDEND-RELATED FACTORS: THE CASE OF MALAYSIA

Abstract

The theory of dividend and its effect on the value of the firm is perhaps one of the most important yet puzzling theories in finance. The main objective of this study is to examine dividend related factors that can be relied upon when determining the value of the firm. We investigate the relationship between individual stock returns with dividend yield, dividend stability and changes in dividend yield from 1992 to 2000 in the Malaysian Trading/Services and Plantation firms. The statistical result from annually cross-sectional regression show weak evidence to support the significant role of dividend yield and dividend stability in explaining firm stock returns. Changes in dividend yield, on the other hand, have negative and significant coefficients in explaining stock returns in Trading/Services firms throughout 1993-1996 and the average crisis period. For Plantation firms, it is negatively significant only in 1994 and 1997.