2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

A STUDY ON LEADING DETERMINANTS OF DIVIDEND POLICY IN MALAYSIA LISTED COMPANIES FOR FOOD INDUSTRY UNDER CONSUMER PRODUCT SECTOR
Santhi Appannan and Lee Wei Sim Faculty of Business Management, AIMST University Email: santhi_appannan@yahoo.com : sim_wslee166@hotmail.com

Abstract

This paper examines the leading determinants that affecting the dividend payment decision by the company management in Malaysia listed companies for food industries under the consumer products sector. There are 5 sample companies that declared cash dividend from year 2004 until 2008 chosen to be analyzed on how the changes in dividend payment decision vary according with the predictors variables. The relationship between independent variables with the current dividend per share as dependent variable is empirically analyzed through the Pearson correlation analysis and Regression Model. The findings showed that variables having strong relationship with dependent variable are not necessary are the determinants of dividend payment decision such as profit after tax that has the strongest relation with dividend per share but being excluded from the regression model. Lastly, the study confirms the fact that debt equity ratio and past dividend per share were the important determinants of dividend payment. Keywords: dividend policy, food industry sector, debt ratio and dividend per share.

945

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

1. INTRODUCTION

Many studies were done previously on the dividend and dividend policy (e.g. Lintner, 1956; Gordon, 1959; Miller and Modigliani, 1961; Mancinelli and Ozkan, 2006; Amidu and Abor, 2006; Zhou and Ruland, 2006). It is one of the most controversial subjects in finance literature and still maintains its prominent position from the past to the present. Researchers and company management always ponder about the dividend payment and also why investors need to pay attention on dividend.

Generally, dividend can be defined as a portion of corporate profit that is paid out by the corporation to their shareholders as a reward for investing in the corporation. Dividend is considered as the sharing of recognized assets among shareholders that could either be paid regularly by corporation or called out by shareholders anytime. However, it is not as a business expense for the corporation. Thus, the rules and guidelines used by the corporation to decide on the amount of dividend paid out to their shareholders are according to the corporations earnings. This is referred as corporate dividend policy.

1.1 PROBLEM STATEMENT There are many researches done on the subject of dividend policy for many countries but the actual motivation of dividend decision still remains unsolved in corporate finance and puzzled the researchers and corporate managers for many years (Baker & Powell, 1999). Although there is no consensus solution for the subject of dividend policy, however many researchers are continuing to conduct study on this field in order to obtain a strong theoretical and empirical analysis on dividend and solve this finance puzzle. When referring to the prior empirical studies on dividend policy, most of the researches have been conducted mainly on U.S. firms. According to Chay and Suh (2005), firms outside the U.S. are operating under different economic and legal environments and thus may exhibit a different set of behavior in their financial activities. Therefore, examining dividend policies of firms outside the U.S. will offer further insights for us into the factors that influence corporate financial decision. As stated by Chay and Suh, different country will have their owned culture, rules and regulations restricted on the dividend policy and the different country based corporate also practicing different policy. As a developing country, Malaysia still lack of the research that investigated on the leading determinants of the dividend policy for the listed companies especially those that emphasize on certain industry. According to Pandey (2001), plantation and consumer products sectors in Kuala Lumpur Stock Exchange (KLSE) are paying highest dividends as they have fewer growth opportunities and higher surplus cash. Thus, the main purpose of this study is to understand the dividend policy in Malaysia listed companies for the consumer sector and also investigate the factors that motivated the dividend decision for the sector.

946

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

1.2 OBJECTIVES OF THE PROJECT

Referring to the problem statement above, this study is to achieve the main objective on discovering how the dividend policy decisions can be various accordingly with their determinants. The following would be the research objectives that going to achieve for this paper and also the questions that were posed for this study: 1.2.1 Research Objectives

1. To identify the determinants that influencing the dividend policy decision by the management in Malaysian listed companies for consumer product sector. 2. To understand the relationship between dividend decision and their determinants in Malaysian listed companies for consumer product sector. 3. To model the impact of current and past dividends, earnings, growth and payout ratio on the dividend policy decision.

1.2.2 Objective Questions

1. What are the determinants that will influence the dividend policy decision by the management in Malaysian listed companies for consumer product sector? 2. What is the relationship between dividend decision and their determinants in Malaysian listed companies for consumer product sector? 3. Do the current and past dividends, earnings, growth and payout ratio will impact on the dividend policy decision?

1.3 Significance of the Project

The significance of this study is to find out on how corporate manager should decide on the dividend policy and what should be considered before they make any decision. The sound dividend policy is very important since a high and regular corporate dividend policy decided by corporate management would create a benchmark for doing well and therefore more dividends can be distributed to shareholders while maintaining the overall health of the company. In Malaysia, there are only few researches being conducted on the topic of dividend policy especially for listed companies of KLSE. However, there is no specific research conducted based on any certain sector from the KLSE and most of the research done just studied about dividend policy for the overall listed companies. According to Pandey (2001)6, the plantation and consumer products industries in Kuala Lumpur Stock Exchange (KLSE) are paying highest dividends as they have fewer growth opportunities and higher surplus cash. Thus, it would be interesting to investigate what are the determinants that influencing the corporation paying higher dividend although they have higher surplus cash.

947

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

2. LITERATURE REVIEW 2.1 DIVIDEND POLICY

According to the Ross, Westerfield and Jordan (2008), dividend can be defined as cash paid out from current or accumulated retained earnings rather than other sources. This payment of dividend to shareholders depends on the company managements willingness to distribute their surplus of cash from their net income to shareholders or to retain it for other re-investment opportunities.

From the research constructed by many different researchers, the reasons of paying dividends are similar whereby lesser dividend payout will lead to the investing of excess cash flow in projects or acquisitions with insufficient net present value by managers for mature company with highly stable. However, paying out too much of cash dividends may reduce the financial flexibility of high growth firms and force them to pass up valuable investment opportunities due to lack of capital. Thus, either of these situations could negatively affect a firms value over time (Baker and Powell, 2000).

Besides that, empirical works that highlights the dividend policy puzzle in both developed and emerging markets should also be considered. Firstly, there may have some empirical studies that excluded some significant variables which may affect the dividend policy decision such as Ho (2003)i and Aivazian et al. (2003) models that excluded ownership structure variables. This would provide evidence that the dividend policy model constructed by the researchers have not yet reached to a specific set of factors that may affect the firms dividend policy. Secondly, there is no precise relationship between the investigated variables and the dependent variable (dividend policy).Ho (2003) stated in his research that firm size of positively related to dividend policy but negatively related in Aivazian et al. (2003)s research. This conflict is due to the different interpretations of the variables or the different statistical method being used. However, the empirical work in dividend policy field has shown strong evidence that the agreed factors are important determinants of the dividend policy in both developed and emerging markets. The theories of dividend policy also serve both markets.

2.2 CURRENT EARNINGS

According to Karam and Puja Goyal (2007), the current earnings which is also known as profit after tax is representing the capacity of corporation to pay dividends and thus it has a positive relationship with dividends. Besides that, the level of profit is considered as an invariable starting point in the managements consideration of whether dividend should pay or not in any given year.

A study conducted by Adaoglu (2000) on instability in the dividend policy on the Istanbul Stock Exchange (ISE) corporations also confirms by the empirical study that firms listed in ISE follow unstable cash dividend policy and the main factor for determining the amount of dividend is the earnings of the firm. Besides that, Eriotis (2005) also examined the effect of distributed earnings of the firms to its dividend policy for Greek firms and they found that Greek firms do not only set their dividend policies by net distributed earnings but also the change from last years earnings while the empirical findings suggested that distributed earnings of the firms included as a

948

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

signal about the firms dividend.

2.3 CASH FLOW

A firms cash flow is a good measure of the firms liquidity and it is very important to compare a firms liquidity position in relation to its dividend payment. According to Amidu and Abor (2006), cash dividend distribution does not only depends on the profitability of firms but also depends on the free cash flow which is the amount of operating cash flow left over after the payment for capital expenditures. The empirical results of this study indicate a significantly positive relationship between cash flow and dividend payout ratios and thus the liquidity or cash-flow position can be considered as an important determinant of the dividend payout ratio.

Besides that, Chay and Suh (2005) also consider cash flow as a determinant of dividend payments where firms facing high levels of cash flow uncertainty are likely to pay low dividends fearing cash shortfalls in the future. This statement correlates to Brav et al. (2004) in their research report which stated that more than two-third of CFOs of dividend-paying firms stated that stability of future cash flow is an important factor affecting dividend decision.

2.4 DEBT EQUITY RATIO

Debt equity ratio (capital structure) can be considered as another feature which has a strong impact on dividend behavior. According to Karam and Puja Goyal (2007), the demand for external finance by the company usually arises on account of constraints imposed by its internal resources since the company can not continue with the investment opportunities with the limited internal resources. The higher the internal flows are given the investment requirements, the lesser will be the demand for borrowings and vice-versa. Thus, the higher the dividend will lead to the higher the demand for borrowing and increase the debt equity ratio and the debt equity ratio is expected to be positively associated with dividend payout per share.

Baker and Powell (2001) also stated that firms with less financing outside will lower dividend payouts. In his research, he states that firms with higher levels of debt will need higher levels of liquidity to allow payoffs on potential implicit claims and firms will normally choose to use more equity instead of financing outside to avoid costs of financial distress. However, according to leading scholars who investigate dividend policies in developing markets, Aivazian et al. (2003) found that emerging market companies exhibit dividend behavior that are similar to US companies but these dividends are explained by profitability, debt and the market-to-book ratio. Their empirical results from the research provide strong support to the statement in which low debt ratio corresponds to high dividend payments which suggests that financial constraints affect dividend policy.

949

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

2.5 PAST DIVIDEND

According to Pandey (2001), past dividend (DPSt-1) paid by the companies is highly significant to the current dividend payout ratios for all industries in the Kuala Lumpur Stock Exchange (KLSE).Generally, the higher coefficients and associated t-statistics of DPSt-1 in the research imply the greater importance of past dividend in deciding the dividend payment. His research is also proven with strong evidence that the management of Malaysian companies always consider past dividend as a more important benchmark for deciding the current dividend payment. Thus, as the finding suggests, respondents attempt to maintain a high degree of consistency in their firms' dividends level by referring to the past dividend declared.

Besides that, another survey conducted by Baker and Smith (2006) on 309 sample firms exhibiting behavior consistent with a residual dividend policy and their matched counterparts to learn how they set their dividend policies also supported with Pandey where past dividends play an important role in determined the dividend policies.

2.6 FLOAT

Float can be defined as the number of shares outstanding and being traded in the public for the corporation. Float can be used as an independent variable to measure external control by shareholders since shareholders will vote for directors who offer high dividends (LaPorta, Silanes, Schliefer, and Vishny, 2000).

The determinant, float, was supported by a research conducted by Hafeez and Attiya (2009) in the firms listed in Karachi Stock Exchange (KSE) with major shareholder in the ownership structure play important role to determine the dividend payout policies and this evidence is also supported by the findings of Amidu and Abor (2006). However, Michaely and Roberts (2006) have a different view on the relationship between float and dividend payment and the important role of ownership structure that could play in dividend smoothing. According to their study, firms with a higher level of large shareholders ownership are less likely to smooth dividends relative to earnings since they are less related to agency issues and asymmetric information.

2.7 SALES GROWTH

A firm which has high growth will have greater need for external financing and thus they may be motivated to establish a good reputation with stockholders through higher dividend payout in order to insure access to external equity that can capitalize the firm (LaPorta, Silanes, Schliefer & Vishny, 2000).

However, the research conducted by Amidu and Abor (2006) also stated that growth in sales were found to have statistically significant and negative associates with dividend payout ratios. According to them, growth in

950

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

sales is used as proxies for the firms future prospects since growing firms require more funds in order to finance their growth and therefore would typically retain greater proportion of their earnings by paying low dividend. In addition, Jeong (2008) also supported Amidu and Abor where sales growth is expected to be negatively related to the degree of dividend smoothing in term of dividend payout. In his study on 299 firms listed on Korea Stock Exchange over a twenty-six years period starting from 1981 to 2006, he uses the signaling theory to imply that firms with growth opportunities or the sales growth of the companies are more likely to pay dividends in order to convey this information to the market. These firms will also have a greater need to retain a higher proportion of earnings to support their valuable investment projects to improve the companys sales growth rate. These two contrary statements stated above are totally different and thus an empirical analysis of Malaysia listed firms sales growth can help to found out how the sales growth of the firm affecting the dividend payout ratios for consumer products sector in order to decide which statement should be supported.

2.8 SIZE OF THE FIRM

From the research conducted by Al-Twaijry and Abdulrahman Ali (2007) on the dividend policy and payout ratio for Kuala Lumpur stock exchange (KLSE) during the period of year 2001 to 2005, the companies size were considered as an independent variable that has an effect on the dividend per share (DPS). The difference between large companies and small companies gave significantly (p < 0.10) better DPS in year 2001 and this difference kept on increasing for the next four years. Thus, the size of the companies can be considered as one of the determinants and independent variable as the previous research.

Besides that, Eriotis (2005) also studied the Greek firms set their dividend policies not only by net distributed earnings but also the changes in dividend and size of the firm where the empirical findings of the research suggested that size of the firms was included as a signal about the firms dividend.

Aivazian et al. (2003) also supported the research conducted by Al-Twaijry and Abdulrahman Ali (2007) and Eriotis (2005) where a firms size is expected to explain the firms dividend policy. In their study, the large firms are more likely to be mature and thus have an easier access to capital markets and should be able to pay more dividends.

3. METHODOLOGY

3.1 STUDY DESIGN

This relevant secondary data (http://www.klse.com.my/website/bm/). was collected from the Bursa Malaysia website

951

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

3.2 STUDY SCOPE

The scope of this study will only focus on the leading determinants of dividend policy for the Malaysian consumer product sector listed companies on the main board for the period of year 2004 until year 2008. The focus of this study is the food industry under consumer products sector for main board.

3.3 SAMPLE SELECTION

Public listed companies are chosen as a sample study because companies listed in KLSE issue shares publicly to all the investors where dividend payments will normally be declared by the companies to their shareholders. The criteria for the companies must be: i) Cash dividend must be paid for the year under consideration ii) Declared cash dividends for the year prior to the year under consideration

3.4 RESEARCH FRAMEWORK

The following diagram will clearly describe the relationship among all the variables.

Independent Variables Current Earnings

Dependent Variable

Cash Flow

Debt Equity Ratio

Past Dividend Dividend

Determinants of Payment Decision

Float

Sales Growth

Size of the Firm

952

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

3.5 METHOD 3.5.1 Pearson Correlation Analysis

Pearson Correlation Analysis is the statistical tool that indicates the strength and direction of the linear relationship between two random variables.

3.5.2 Regression Model

The Multiple Regression equation or function that included all the independent and dependent variables for this study is computed as follow: DPS = 0 + 1PAT + 2CF + 3DERATIO + 4PASTDPS + 5SG + 6SIZE + 7FLOAT where DPS PAT CF DERATIO PASTDPS SG SIZE FLOAT = Current dividend per share = Profit after tax (current earnings) = Cash flow = Debt equity ratio = Past dividend per share = Sales growth = Size of the firm = outstanding shares of the firm = regression coefficient (parameter of the function)

The multiple regression function shown above is to investigate the effect of each of the independent variable on dependent variable at the same time and of the same set of analysis. The changing in value would be the degree of effects on DPS and the positive and negative sign of the value will show how the direction of effects would be. The higher the value of for a particular variable represents the higher the effects of that variable on DPS. The value of (parameter for variables) in the function above can be found by using regression model and this value is represented by B value in the result table shown in the analysis.

3.5.3 Tools
SPSS (Statistical Package for the Social Sciences) used to run the statistical analysis of Pearson Correlation Analysis and Regression model.

953

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

4. RESULTS ANALYSIS
The Table 1 below will show the comparison of correlation analysis between the variables for the 5 sample companies.

Table 1: Correlations between Dependent and Independent Variables

Companies Dependent Variable Profit after tax Cash flow Debt equity ratio .325 .594 5 .282 .645 5 -.380 .528 5 -.672 .214 5 .374 .535 5 Past dividen d per share -.272 .658 5 .460 .436 5 .190 .759 5 -.323 .596 5 -.718 .172 5 Sales growth Size of the firm Outstandi ng shares of the firm .a . 5 .a . 5 -.357 .556 5 .883* .047 5 .a . 5

Company A

Company B

Company C

Company D

Company E

Current dividend payout per share Current dividend payout per share Current dividend payout per share Current dividend payout per share Current dividend payout per share

Pearson Correlation Sig.(2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N

.216 .727 5 .010 .987 5 .554 .333 5 -.210 .734 5 .602 .283 5

-.819 .090 5 .846 .071 5 -.353 .560 5 .221 .721 5 -.602 .922 5

.881* .048 5 -.397 .509 5 .572 .314 5 -.482 .411 5 .325 .593 5

-.132 .833 5 -.465 .430 5 -.461 .435 5 .448 .450 5 .367 .543 5

*. Correlation is significant at the 0.05 level (2-tailed). a. Cannot be computed because at least one of the variables is constant.

The variable that has not affected a firms dividend payment decision is outstanding shares of the firm since this variable has constant value throughout the 5 year period for 60% of the sample companies. However, this variable is highly correlated with the current dividend per share in a positive way for Company D(0.883) and in a negative direction for Company C (-0.357).

954

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

4.6.2 Regression Model

From the regression result table shown below, it is clearly shown that the main determinant that has affected most in the current dividend per share is debt equity ratio for Company A, B and E since the value of these three companies are the highest among other independent variables.

Table 2: Coefficients between Dividend Per Share and other Independent Variables (Multiple Regression)
Companies Model Unstandardized Coefficients B Standard Error .288 0.000 -5.314E-10 0.000 2.928 0.000 .001 0.000 -1.629E-9 0.000 2.187 0.000 3.586E-8 0.000 36.223 0.000 .423 0.000 -3.514E-8 0.000 .465 0.000 -3.672E-9 0.000 .082 0.000 .005 0.000 -5.266E-9 0.000 -.596 0.000 -2.917E-9 0.000 -.037 0.000 -4.834E-9 0.000 2.024E-8 0.000 .361 0.000 1.577E-8 0.000 20.834 0.000 .418 0.000 -4.661E-9 0.000 Standardized Coefficients Beta t Sig

Company A

Company B

Company C

Company D

Company E

(Constant) Cash flow Debt equity ratio Sales growth Size of the firm (Constant) Profit after tax Debt equity ratio Past dividend per share Size of the firm (Constant) Cash flow Past dividend per share Sales growth Outstanding shares of the firm (Constant) Profit after tax Past dividend per share Size of the firm Outstanding shares of the firm (Constant) Profit after tax Debt equity ratio Past dividend per share Size of the firm

-.054 .302 .936 -.253 1.504 .590 .583 -1.900 -1.135 .078 .762 -.499 -.267 .048 -.534 1.357 1.958 -1.095 .300 -1.016

a. Dependent Variable: Current dividend payout per share

From the results analysis shown in this chapter, we can conclude that 60% of the sample companies are using debt equity ratio to determine their current dividend payment decision where as the remaining 40% of the sample company refers to their past dividend per share in deciding on the current dividend per share.

The results shows that the companies that prefer to use debt equity ratio to determine their current dividend payment are the companies that are using equity-financing to operate their business if their debt equity ratio ranges from 0.0015 to 0.0124.. The value of this ratio is much lower than the other 40% of the sample companies where their debt equity ratio ranges from 0.047 to 1.42 .. The 60% companies that use debt equity ratio as determinant have less total liabilities. In fact, some of these companies dont incur interest payment from longterm liabilities for the 5 year period. This strongly proves that 60% of the sample companies are using equity capital from shareholders to operate their business. However this financing will reduce the internal flow of funds.

955

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Thus, these companies will tend to pay lesser dividend to shareholders due to the low debt equity ratio in order to re-invest the surplus funds for potential investment. If there is an increase in debt equity ratio, the companies will tend to pay higher dividends to shareholders since they are getting external funds for the business and there will be a surplus of internal funds for dividend distribution.

The correlation between debt equity ratio with the current dividend per share also relates positively. It means that a company which has a lower debt equity ratio tends to pay lesser dividend to their shareholders and this was supported by Baker and Powell (2001) and Karam and Puja Goyal (2007)16 in their research. According to these two researchers, debt to equity ratio is has a positive relationship with the dividend payments while the firms with high payout ratios tend to be debt financed while the firms with low payout ratios tend to be equity financed.

The remaining 40% sample companies use their past dividend per share as determinants for the current dividend payment since they take the past dividend per share as the benchmark to maintain a higher degree of consistency in their firms' dividend level. This was supported by the research done by Pandey (2001)6.

Generally, the determinants that are used by Malaysian listed companies in the food industries under the consumer products sector are debt equity ratio and past dividend per share.

5. CONCLUSION AND RECOMMENDATION

From this study, the regression results showed that 60% of the sample companies in the food industries from KLSE use debt equity ratio as determinants for their current dividend payment decision where as the remaining 40% is benchmarking their past dividend per share to decide on the current dividend policy. All of the sample companies are sharing a same characteristic where their business is operating through equity capital from shareholders rather than the external funds such as loan from the banks.

The positive correlation between current dividends per share with the companies debt equity ratio indicates if the debt equity ratio is lower then the dividend payment will be lower. The debt equity ratio of a firm is representing the firms percentage of total funds provided by the creditors versus the owners who are also the shareholders. If the ratio is lower, it means that the portion of total funds contributed by the shareholders are more than the creditors and thus the companies are relying on the equity capital and on other internal funds to operate their business. Due to the more reliable on internal funds, these companies tend to pay fewer dividends to their shareholders in order to retain cash for other potential investment opportunities.

The second main determinant of dividend payment decision is the companys past dividend payment. From this study, 40% of the companies from the food industry are referring to their previous dividend when deciding on the current dividend and these companies are having a lower fluctuating in the dividend per share. These companies are trying to maintain a stable and consistent dividend flow in order to avoid shareholders

956

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

dissatisfaction when they compare the current dividend declared with the previously declared dividend. If the company didnt maintain a consistent dividend flow, the dividend payment will fluctuate accordingly to the current firms performance where it will show an unstable performance of the company since the dividend payment is declared from the companys retained earnings.

However, the dividend payment decisions based on past dividend tend to be riskier and less favorable when compared to the dividend decisions that are based on debt equity ratio. The global economy recession in recent years would be the main factor that has affected most of the companies performance and it will increase the burden of companies that tend to maintain consistent dividend flow. Companies that are not performing as well as the previous year will lack internal funds due to the high consistent dividend payments. This consistent dividend flow will not only burden the companies but may also forgo many potential investments that can improve the business performance. Thus, companies that use past dividend as their determinant in dividend payment decision should try to follow the other 60% of the sample companies that use debt equity ratio.

Besides that, both the statistical analysis in this study also shows that independent variables that have a strong relationship with dependent variable do not necessarily have to be the determinants for the dependent variable. This had been proven in the analysis of Company C where the profit after tax of the company has the highest correlation coefficient value of 0.554 in the Pearson Correlation Analysis but it is excluded as a determinant during the regression analysis. Thus, the independent variables which have high correlation with dependent variable is not necessary being the variable that effecting much or determine the dependent variable, dividend payment decision in this study.

In conclusion, this study had confirmed that 60% of the companies from the food industries are relying on the debt equity ratio when deciding the dividend payment ratio while 40% of the companies will refer to past dividends as a benchmark for the consistent level of dividend payment through this simple statistical analysis. The debt equity ratio is proved to be positively correlated with the current dividend per share and affecting much of the firms decision when setting the dividend policy. Therefore, debt equity ratio is the leading determinant of dividend policy in food industry for the Malaysia listed company under consumer products sector. The results analysis obtained and the important theories of dividend and leading determinants of dividend that summarized in this study may hopefully been used as a ready reference for future researches on the same area under the discussion.

Based on the results of this study, debt equity ratio as an important determinant should be emphasized and considered by all the companies under food industry when deciding on the dividend payment policy and not necessarily based on the current earnings, cash flow or other factors that often formulated by academics. The consideration of debt equity ratio as determinant for dividend policy is essential in providing and maintaining a reasonable policy that take care of the benefits for both company and shareholders.

This study has found that most companies in the food industry are using equity financing when operating the business since most of their debt equity ratio is lower than the other industries. The lower debt equity ratio of the industries indicates that the companies are relying on the internal funds to operating their business where the amount of cash dividend to be distributed will affect the internal funds available. For firms that are paying out too much of cash dividend to their shareholders, the firms available internal funds will reduce and many valuable investment opportunities or potential business expansion may not take place due to the shortage of funds. The

957

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

higher payment of dividend will also increase the likelihood of the firms to access external funds such as loans from bank or other financial institutions in order to fund investment activities. The interest bearing of the firm will also be increased and this would affect the companys net earnings. Therefore, the management should consider on debt equity ratio when deciding on dividend policy in order to retain some of their earnings for other investments while maintaining the wealth fare of shareholders to receiving cash dividend.

Besides that, it is unrealistic for the firms from these industries to seek a dividend policy that follows a constant payout by referring to the past dividend as a determinant for their dividend policy decision. Due to the susceptibility of the food industries profitability to the economic changes in the country and worldwide, it will be difficult for the firms to maintain a consistent dividend flow based on their past dividend. Thus, the companies in food industries need to adopt a low, reasonable and realistic dividend policy that would be suitable for the current circumstances by considering debt equity ratio as their determinant for dividend policy decision.

The adoption of dividend policy with the debt equity ratio as a determinant would be more realistic and reasonable since the distribution of the dividend depends on the firms current capital structure. The firms that currently operate using equity capital from shareholders will have a lower debt equity ratio and thus they will reduce the amount of dividend distribution to retain surplus of internal funds to finance other potential investment activities. This is due to the positive relationship between debt equity ratio with the current dividend payment which has been proven in the study. The firms that use debt equity ratio as their determinants for dividend policy will not tend to maintain a consistent dividend flow as they will consider on the current financial position of the firm. The dividend policy that is currently adopted for some of the food industry is to maintain constant dividend without considering the current financial position of the firm will tend to increase the burden of company to afford the high distribution of cash dividend with their limited internal flow due to the changes in net earnings affected by global economy crisis. Thus, it is recommended that the firms in food industry should refer to debt equity ratio as their determinant in producing a reasonable and realistic dividend policy decision.

The leading firms in food industry normally will generate higher sales growth and current earnings due to their larger size of the firm and leading position in the industry. The higher sales growth and current earnings of the firms was lead to the adoption of dividend policy based on these two determinants and thus higher cash dividend would be distribute to their shareholder for the leading firms. The higher sales growth and current earnings of the firm not necessary means that they need to distribute most of their earnings as dividend to shareholders. The overly payment of dividend without consideration of other factors will potentially lead to the lack of surplus funds for the leading firms to finance other valuable investments or to overcome any emergence of cash need in the business operation. Therefore, debt equity ratio should be considered by the firms while deciding on the dividend policy in order to avoid overpayment of dividend based on their companys capital structure.

When the company is mostly running in an equity basis, it should consider on the impacts of overpayment of dividend when deciding dividend policy. By referring of debt equity ratio as determinant for companys dividend policy, the firms can avoid the situation where are lack of internal funds to finance their business expansion or projected investment due to the overpayment of dividend. This determinant will help company management to have a better planning on the amount for retained earnings to finance other business activities and reduce the likelihood to search for external funds which are costly and increase the interest bearing of the firm.

958

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Although the adoption of dividend policy with debt equity ratio as determinant may reduce the amount of cash dividend distributed to shareholders when compared with the policy that referring other determinants, the firm needs to improve their business in a cheaper way without high interest bearing and total debts. The operating of the business with internal funds will reduce the risk of bankruptcy due to the inability to make repayment on huge amount of loan principal and high interest payment to banks or financial institutions.

In conclusion, this study had confirmed the fact that most of the food industries companies are relying on the debt equity ratio when deciding the dividend payment ratio. The debt equity ratio is proved to be positively correlated with the current dividend per share and affecting much of the firms decision when setting the dividend policy. Therefore, debt equity ratio is the leading determinant of dividend policy in food industry for the Malaysia listed company under consumer products sector. The results analysis obtained and the important theories of dividend and leading determinants of dividend that summarized in this study may hopefully been used as a ready reference for future researches on the same area under the discussion.

959

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

REFERENCES
Adaoglu, Cahit (2000). Instability in the Dividend Policy of the Istanbul Stock Exchange (ISE) Corporations: Evidence from an Emerging Market, Emerging Markets Review, 1(3), 252-270

Aivazian, V., Booth, l. and Cleary, S., (2003). Do Emerging Market Firms Follow Different Dividend Policies From U.S. Firms? Journal of Financial Research, 26(3), pp. 371-387.

Allen F., and R. Michaely, (2003), Payout Policy, Handbook of the Economics of Finance.

Al-Twaijry, Abdulrahman Ali. (2007, September 22). Dividend policy and payout ratio: evidence from the Kuala Lumpur stock exchange. Journal of Risk Finance.

Amidu, Mohammed and Abor, Joshua. (22 March 2006) Determinants of Dividend Payout Ratios in Ghana, Journal of Risk Finance, Vol 7,

Baker, H. K. & G.E. Powell. (1999). How Corporate Managers View Dividend Policy. Quarterly Journal of Business and Economics. Lincoln, (Spring)

Baker, H., & Powell, G. (2000, Spring/Summer2000). Determinants of Corporate Dividend Policy: A Survey of NYSE Firms. Financial Practice & Education, 10(1), 29-40.

Baker, H. K., E. T. Veit & G. E. Powell. (2001). Factors Influencing Dividend Policy Decisions of Nasdaq Firms. The Financial Review, Eastern Finance Association, (August)

960

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Baker, H. K. and Smith, D. M. (2006). In search of a residual dividend policy. Review of Financial Economics, 15(1), 1-18.

Baker.Kent.H. Saadi.S, Dutta. Gandhi.D, (2007) the perception of dividend by Canadian managers: new survey evidence, International Journal of Managerial Finance, vol.3

Black, Fischer (1976), "The Dividend Puzzle," The Journal of Portfolio Management, winter, pp.634-639. Brav, A., Graham, J.R., Harvey C.R., and R. Michaely, 2004, Payout policy in the 21st century, Journal of Financial Economics, forthcoming Brealey R. and S. Myers, 2005, Principles of corporate finance (8th edition), London: McGraw-Hill.

Carlson, J. B. (April 2001). Why is the Dividend Yield so Low? Federal Reserve Bank of Cleveland. Economic Commentary.

DeAngelo, H., DeAngelo, L. and Skinner, D. (2004). Are dividends disappearing? Dividend concentration and the consolidation of earnings. Journal of Financial Economics, 72, 425-456.

Eriotis. Nikolaos, (2005) The Effect of Distribution Earnings and Size of the Firm to its Dividend Policy, International & Economics Journal.

Fama, E. F. and French, K. R. (2001). Disappearing dividends: Changing Firm characteristics or lower propensity to pay? Journal of Financial Economics, 60(1), 3-43

Ferris, S., Sen, N. and Yui, H. (2006). God save the queen and her dividends: corporate payouts in the UK. Journal of Business, 70, 1149-1173.

961

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Frankfurter, George M., and Wood, Bob G. Jr. (2002). Dividend Policy Theories and Their Empirical Tests, International Review of Finance Analysis, 11: 111-138.

Goergen, M., Renneboog, L. and da Silva, L. C. (2005). When do German firms change their dividends? Journal of Corporate Finance, 11 (1-2), n 375-399.

Hafeez Ahmed and Attiya Javid. Dynamics and Determinants of Dividend Policy in Pakistan (Evidence from Karachi Stock Exchange Non-Financial Listed Firms), International Research Journal of Finance and Economics, ISSN 1450-2887 Issue 25 (2009)

Ho, H., 2003. Dividend Policies in Australia and Japan. International Advances in Economic Research, 9(2), pp.91-100.

J. B. Chay. And Jungwon Suh.(August 2005). Cross-Sectional Determinants of Dividend Payments: International Evidence. Sungkyungkwan University and Ewha Womans University, Current Draft: August 2005

Jinho Jeong. (2008). An Investigation of Dynamic Dividend Behavior in Korea, Division of Business Administration, Korea University Working Paper

LaPorta, R., F. Lopez-de-Silanes, A. Schliefer & R. Vishny. (2000). Agency Problems and Dividend Policies Around the World, Journal of Finance, 55(1), February, 1-34. Lintner, John, (1956), "Distribution of Incomes of Corporations Among Dividends, Retained Earnings and Taxes," American Economics Review 46 (No. 2, May), 97-1 13.

Liu, S. and Hu, Y. (2005). Empirical analysis of cash dividend payment in Chinese listed companies. Nature and Science, 3(1), 65-70.

962

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Michaelly, R., Roberts, M. (2006), Dividend smoothing, Agency Cost and Information Asymmetry: Lessons from Dividend Policies of Private firms, Cornell University Working paper.

Miller, Merton and Franco Modigliani, (1961), "Dividend Policy, Growth, and the Valuation of Shares," Journal of Business-34 (No. 4, October), 411-433.

Mitton, T. (2004). Corporate governance and dividend policy in emerging markets. Emerging Markets Review, 5(4), 409-426.

Pal, K., & Goyal, P. (2007, July). Leading Determinants of Dividend Policy: A Case Study of the Indian Banking Industry. Decision (0304-0941), 34(2), 87-112.

Pandey I M. (2001). Corporate Dividend Policy and Behaviour: The Malaysian Evidence., Indian Institute of Management Ahmedabad (IIMA), India. Working Paper No. 2001-11-01

Stephen A. Ross, Randolph W. Westerfield and Bradford D. Jordan. (2008). Essentials of Corporate Finance (Sixth ed., p. 435). Outside of U.S.: McGraw Hill/Irwin.

APPENDICES
1. Company A

963

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Table 1: Data collected from Company A annual report during years 2004-2008
Years Dividend payout per share Profit after tax Cash flow Debt equity ratio Past dividend per share Sales growth (%) Size of the firm Float (outstanding shares) 2004 0.075 17,509,189 13,792,080 0.0042 0.2 -62.18 110,794,800 80,000,000 2005 0.1 8,064,909 7,663,791 0.0016 0.075 -32.88 103,632,610 80,000,000 2006 0.15 9,472,426 5,048,952 0.0108 0.1 0.00 102,509,544 80,000,000 2007 0.15 16,397,543 8,554,852 0.0032 0.15 43.07 103,666,950 80,000,000 2008 0.15 25,996,089 4,962,182 0.0027 0.15 72.81 114,959,065 80,000,000

Table 2: Correlations between Dependent and Independent Variables

Current dividend payout per share Current dividend Pearson Correlation Sig. (2-tailed) N 5 1 Profit after tax .216 .727 5 Cash flow -.819 .090 5 Debt Past dividend Sales Outstanding Size of shares of the firm .a . 5

equity ratio per share growth the firm .325 .594 5 -.272 .658 5 .881* .048 5 -.132 .833 5

payout per share

*. Correlation is significant at the 0.05 level (2-tailed). a. Cannot be computed because at least one of the variables is constant.

Table 3: Coefficients between Dividend per share and other independent Variables (Multiple Regression)
Standardized Model Unstandardized Coefficients Coefficients t Sig.

964

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

B 1 (Constant) Cash flow Debt equity ratio Sales growth Size of the firm .288 -5.314E-10 2.928 .001 -1.629E-9

Std. Error .000 .000 .000 .000 .000

Beta . -.054 .302 .936 -.253 . . . . . . . . .

a. Dependent Variable: Current dividend payout per share

Table 4: Model Summarya (Linear Regression) Model 1. Cash Flow 2. Debt Equity Ratio 3. Sales Growth 4. Size of the firm R 0.819 0.325 0.881 0.132 R2 0.670 0.106 0.776 0.017 Adjusted R2 0.560 -0.192 0.701 -0.310 Std. Error of the Estimate 0.023446 0.038608 0.019325 0.040469

a. Dependent Variable: Current dividend payout per share

Model
1 (Constant) Cash Flow 2 (Constant) Debt Equity Ratio 3 (Constant) Sales Growth 4 (Constant) Size of the firm

Table 5: Coefficientsa (Linear Regression) Unstandardized Standardized Coefficients Coefficients B Std. Error Beta
0.189 -8.035E-9 0.111 3.153 0.123 0.001 0.216 -8.493E-10 0.028 0.000 0.029 5.297 0.009 0.000 0.396 0.000 -0.132 0.881 0.325 -0.819

t
6.742 -2.469 3.765 0.595 14.139 3.223 0.546 -0.230

Sig.
0.007 0.090 0.033 0.594 0.001 0.048 0.623 0.833

a. Dependent Variable: Current dividend payout per share

965

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

2. Company B

Table 6: Data collected from Company Bs annual report during years 2004-2008
Years Dividend payout per share Profit after tax Cash flow Debt equity ratio Past dividend per share Sales growth (%) Size of the firm Float (outstanding shares) 2004 0.144 5,537,422 30,612,613 0.0116 0.172 -23.00 77,815,342 60,000,000 2005 0.072 4,684,877 6,418,739 0.0111 0.144 -5.40 78,141,810 60,000,000 2006 0.072 4,780,658 7,345,584 0.0124 0.072 -4.33 78,713,136 60,000,000 2007 0.1095 6,461,846 7,244,950 0.0116 0.072 22.40 78,537,143 60,000,000 2008 0.074 7,912,206 10,196,584 0.0122 0.1095 17.68 82,097,863 60,000,000

Table 7: Correlations between Dependent and Independent Variables

Current dividend payout per share Current dividend Pearson Correlation Sig. (2-tailed) N 5 1 Profit after tax .010 .987 5 Cash flow .846 .071 5 Debt Past dividend Sales Outstanding Size of shares of the firm .a . 5

equity ratio per share growth the firm .282 .645 5 .460 .436 5 -.397 .509 5 -.465 .430 5

payout per share

966

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Table 7: Correlations between Dependent and Independent Variables

Current dividend payout per share Current dividend Pearson Correlation Sig. (2-tailed) N 5 1 Profit after tax .010 .987 5 Cash flow .846 .071 5 Debt Past dividend Sales Outstanding Size of shares of the firm .a . 5

equity ratio per share growth the firm .282 .645 5 .460 .436 5 -.397 .509 5 -.465 .430 5

payout per share

a. Cannot be computed because at least one of the variables is constant.

Table 8: Coefficients between Dividend Per Share and other Independent Variables (Multiple Regression)
Standardized Unstandardized Coefficients Model 1 (Constant) Profit after tax Debt equity ratio Past dividend per share Size of the firm B 2.187 3.586E-8 36.223 .423 -3.514E-8 Std. Error .000 .000 .000 .000 .000 1.504 .590 .583 -1.900 Coefficients Beta t . . . . . Sig. . . . . .

a. Dependent Variable: Current dividend payout per share

Table 9: Model Summarya (Linear Regression) Model 1. Profit After Tax R 0.10 R2 0.000 Adjusted R2 -0.333 Std. Error of the Estimate 0.0370017

967

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

2. Debt Equity Ratio 3. Past Dividend Per Share 4. Size of the firm
a. Dependent Variable: Current dividend payout per share

0.282 0.460 0.465

0.080 0.211 0.216

-0.227 -0.052 -0.045

0.0354989 0.0328653 0.0327630

Model
1 (Constant) Profit After Tax 2 (Constant) Debt Equity Ratio 3 (Constant) Past Dividend Per Share 4 (Constant) Size of the firm

Table 10: Coefficientsa (Linear Regression) Unstandardized Standardized Coefficients t Coefficients B Std. Error Beta
0.093 2.396E-10 0.299 17.344 0.056 0.333 0.774 -8.595E-9 0.083 0.000 0.401 34.033 0.045 0.372 0.747 0.000 -0.465 0.460 -0.282 0.010 1.125 0.017 0.744 -0.510 1.257 0.896 1.035 -0.909

Sig.
0.342 0.987 0.511 0.645 0.298 0.436 0.377 0.430

a. Dependent Variable: Current dividend payout per share

3. Company C

Table 11: Data collected from Company Cs annual report during years 2004-2008
Years Dividend payout per share Profit after tax Cash flow Debt equity ratio Past dividend per share Sales growth (%) Size of the firm Float (outstanding shares) 2004 0.05 9,493,173 52,385,407 1.0376 0.05 24.20 189,462,366 64,389,589 2005 0.15 11,165,899 16,849,807 1.193 0.05 22.12 223,359,934 68,206,411 2006 0.13 11,815,420 15,485,188 1.1766 0.15 20.27 240,016,212 69,640,611 2007 0.05 12,148,120 15,968,699 1.4119 0.13 6.51 282,196,955 71,776,170 2008 0.037 7,199,561 16,407,968 1.4098 0.05 9.30 353,594,209 77,831,008

Table 12: Correlations between Dependent and Independent Variables

968

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Current dividend payout per share Current dividend Pearson Correlation Sig. (2-tailed) N 5 .333 5 .560 5 .528 5 1 Profit Cash Debt

Past dividend Sales growth .572 .314 5 Size of the firm -.461 .435 5

Outstanding shares of the firm -.357 .556 5

after tax flow equity ratio per share .554 -.353 -.380 .190 .759 5

payout per share

Table 13: Coefficients between Dividend Per Share and other Independent Variables (Multiple Regression)
Standardized Unstandardized Coefficients Model 1 (Constant) Cash flow Past dividend per share Sales growth Outstanding shares of the firm B .465 -3.672E-9 .082 .005 -5.266E-9 Std. Error .000 .000 .000 .000 .000 -1.135 .078 .762 -.499 Coefficients Beta t . . . . . Sig. . . . . .

a. Dependent Variable: Current dividend payout per share

Table 14: Model Summarya (Linear Regression) Model 1. Cash flow R 0.353 R2 0.125 Adjusted R2 -0.167 Std. Error of the Estimate 0.056622

969

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

2. Past Dividend Per Share 3. Sales Growth 4. Outstanding Share

a. Dependent Variable: Current dividend payout per share

0.190 0.572 0.357

0.036 0.327 0.127

-0.285 0.103 -0.164

0.059422 0.049657 0.056544

Model
1 (Constant) Cash Flow 2 (Constant) Past Dividend Per Share 3 (Constant) Sales Growth 4 (Constant) Outstanding Share

Table 15: Coefficientsa (Linear Regression) Unstandardized Standardized Coefficients t Coefficients B Std. Error Beta
0.110 -1.144E-9 0.066 0.200 0.022 0.004 0.348 -3.767E-9 0.048 0.000 0.058 0.597 0.056 0.003 0.401 0.000 -0.357 0.572 0.190 -0.353 2.289 -0.654 1.145 0.336 0.390 1.207 0.868 -0.662

Sig.
0.106 0.560 0.335 0.759 0.722 0.314 0.449 0.556

a. Dependent Variable: Current dividend payout per share

4. Company D

Table 16: Data collected from Company Ds annual report during years 2004-2008
Years Dividend payout per share Profit after tax Cash flow Debt equity ratio Past dividend per share Sales growth (%) Size of the firm Float (outstanding shares) 2004 0.1 5,456,167 3,573,777 1.0541 0.6 -30.18 108,499,033 60,014,000 2005 0.18 6,538,241 3,169,727 0.2982 0.1 49.97 85,774,310 59,613,700 2006 0.2 15,964,129 7,210,701 0.1676 0.18 42.00 88,795,375 62,535,500 2007 0.25 35,377,953 16,498,111 0.1006 0.2 117.03 123,593,786 76,081,080 2008 0.5 177,178 6,769,828 0.047 0.25 -90.70 116,783,629 81,641,442

Table 17: Correlations between Dependent and Independent Variables

970

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Current dividend payout per share Current dividend Pearson payout per share Correlation Sig. (2-tailed) N 5 .734 5 .721 5 .214 5 1 Profit after tax -.210 Cash flow Debt

Past dividend Sales Size of

Outstanding shares of the firm .883* .047 5

equity ratio per share growth the firm -.672 -.323 .596 5 -.482 .411 5 .448 .450 5

.221

*. Correlation is significant at the 0.05 level (2-tailed).

Table 18: Coefficients between Dividend Per Share and other Independent Variables (Multiple Regression)
Standardized Unstandardized Coefficients Model 1 (Constant) Profit after tax Past dividend per share Size of the firm Outstanding shares of the firm B -.596 -2.917E-9 -.037 -4.834E-9 2.024E-8 Std. Error .000 .000 .000 .000 .000 -.267 .048 -.534 1.357 Coefficients Beta t . . . . . Sig. . . . . .

a. Dependent Variable: Current dividend payout per share

Table 19: Model Summarya (Linear Regression) Model R R2 Adjusted R2 Std. Error of the Estimate

971

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

1. Profit After Tax 2. Past Dividend Per Share 3. Size of the Firm 4. Outstanding Share
a. Dependent Variable: Current dividend payout per share

0.210 0.323 0.448 0.883

0.044 0.104 0.201 0.780

-0.274 -0.194 -0.066 0.706

0.171499 0.166006 0.156852 0.082329

Model
1 (Constant) Profit After Tax 2 (Constant) Past Dividend Per Share 3 (Constant) Size of the Firm 4 (Constant) Outstanding Share

Table 20: Coefficientsa (Linear Regression) Unstandardized Standardized Coefficients t Coefficients B Std. Error Beta
0.275 -2.300E-9 0.313 -0.253 -0.178 4.050E-9 -0.649 1.316E-8 0.110 0.000 0.136 0.427 0.494 0.000 0.277 0.000 0.883 0.448 -0.323 -0.210 2.509 -0.373 2.308 -0.592 -0.360 0.867 -2.342 3.259

Sig.
0.087 0.734 0.104 0.596 0.742 0.450 0.101 0.047

a. Dependent Variable: Current dividend payout per share

5. Company E

Table 21: Data collected from Company Es annual report during years 2004-2008
Years Dividend payout per share Profit after tax Cash flow Debt equity ratio Past dividend per share Sales growth (%) Size of the firm Float (outstanding shares) 2004 0.05 167,181 1,667,456 0.0015 0.05 25.42 65,103,687 60,000,000 2005 0.05 1,261,884 4,601,437 0.0027 0.05 166.70 63,443,572 60,000,000 2006 0.05 2,857,132 9,325 0.0027 0.05 95.68 68,840,227 60,000,000 2007 0.07 4,218,443 35,887 0.0025 0.05 41.24 70,048,697 60,000,000 2008 0.035 1,844,712 32,736 0.0033 0.07 -51.51 67,744,672 60,000,000

972

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

Table 22: Correlations between Dependent and Independent Variables

Current dividend payout per share Current dividend Pearson payout per share Correlation Sig. (2-tailed) N 5 1 Profit after tax .602 .283 5 Cash flow -.062 .922 5 Debt Past dividend Sales Outstanding Size of shares of the firm .a . 5

equity ratio per share .374 .535 5 -.718 .172 5

growth the firm .325 .593 5 .367 .543 5

a. Cannot be computed because at least one of the variables is constant.

Table 23: Coefficients between Dividend Per Share and other Independent Variables (Multiple Regression)
Standardized Unstandardized Coefficients Model 1 (Constant) Profit after tax Debt equity ratio Past dividend per share Size of the firm B .361 1.577E-8 20.834 .418 -4.661E-9 Std. Error .000 .000 .000 .000 .000 1.958 -1.095 .300 -1.016 Coefficients Beta t . . . . . Sig. . . . . .

a. Dependent Variable: Current dividend payout per share

Table 24: Model Summarya (Linear Regression) Model 1. Profit After Tax 2. Debt Equity Ratio R 0.602 0.374 R2 0.362 0.140 Adjusted R2 0.150 -0.146 Std. Error of the Estimate 0.011479 0.013330

973

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

3. Past Dividend Per Share 4. Size of the firm

a. Dependent Variable: Current dividend payout per share

0.718 0.367

0.516 0.135

0.355 -0.154

0.010000 0.013372

Model
1 (Constant) Profit After Tax 2 (Constant) Debt Equity Ratio 3 (Constant) Past Dividend Per Share 4 (Constant) Size of the firm

Table 25: Coefficientsa (Linear Regression) Unstandardized Standardized Coefficients t Coefficients B Std. Error Beta
0.041 4.848E-9 0.069 7.126 0.105 -0.100 -0.062 1.684E-9 0.009 0.000 0.027 10.188 0.031 0.559 0.165 0.000 0.367 -0.718 -0.374 0.602 4.433 1.306 2.602 -0.699 3.441 -1.789 -0.374 0.684

Sig.
0.021 0.283 0.808 0.535 0.041 0.172 0.733 0.543

a. Dependent Variable: Current dividend payout per share

6. Comparison of Results Analysis for Sample Companies Table 26: Correlations between Dependent and Independent Variables
Companies Dependent Variable Profit after tax Cash flow Debt equity ratio Past dividend per share Sales growth Size of the firm Outstandi ng shares of the firm Current Company A dividend payout per share Current dividend Company B payout per share Current Pearson Correlation Sig.(2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson .554 -.353 -.380 .190 .572 -.461 -.357 .010 .987 5 .846 .071 5 .282 .645 5 .460 .436 5 -.397 .509 5 -.465 .430 5 .a . 5 .216 .727 5 -.819 .090 5 .325 .594 5 -.272 .658 5 .881* .048 5 -.132 .833 5 .a . 5

974

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

dividend Company C payout per share Current dividend Company D payout per share Current dividend Company E payout per share

Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N

.333 5

.560 5

.528 5

.759 5

.314 5

.435 5

.556 5

-.210 .734 5

.221 .721 5

-.672 .214 5

-.323 .596 5

-.482 .411 5

.448 .450 5

.883* .047 5 .a . 5

.602 .283 5

-.602 .922 5

.374 .535 5

-.718 .172 5

.325 .593 5

.367 .543 5

*. Correlation is significant at the 0.05 level (2-tailed). a. Cannot be computed because at least one of the variables is constant.

Table 27: Coefficients between Dividend Per Share and other Independent Variables (Multiple Regression)
Companies Model Unstandardized Coefficients B Company A (Constant) Cash flow Debt equity ratio Sales growth Size of the firm (Constant) Profit after tax Debt equity ratio Past dividend per share Size of the firm (Constant) Cash flow Past dividend per share Sales growth Outstanding shares of the firm .288 -5.314E-10 2.928 .001 -1.629E-9 2.187 3.586E-8 36.223 .423 -3.514E-8 .465 -3.672E-9 .082 .005 -5.266E-9 Standard Error 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Standardized Coefficients Beta -.054 .302 .936 -.253 1.504 .590 .583 -1.900 -1.135 .078 .762 -.499 t Sig

Company B

Company C

975

2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING

nd

nd

(Constant) Profit after tax Past dividend per share Company D Size of the firm Outstanding shares of the firm (Constant) Profit after tax Debt equity ratio Company E Past dividend per share Size of the firm a. Dependent Variable: Current dividend payout per share

-.596 -2.917E-9 -.037 -4.834E-9 2.024E-8 .361 1.577E-8 20.834 .418 -4.661E-9

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

-.267 .048 -.534 1.357 1.958 -1.095 .300 -1.016

976