Dividend Policy and Shareholder Wealth: Evidence of Malaysia’s Top Five Listed Food and Beverages Companies

Abstract

Dividend policy is one of the most debated corporate issues due to unresolved dividend policy effects on shareholder wealth. Hence, this research aims to determine the relationship between dividend policy and shareholder wealth in Malaysia's top five listed Food & Beverages (F&B) companies with the largest market capitalization in 2019. The findings enable financial managers to implement an optimum dividend policy by distributing a reasonable dividend to its shareholders and retaining its growth and survival. Secondary data was collected from the annual report of the top five F&B companies for ten years (2009-2018). The Chow Stability Test, Pooled Ordinary Least Square model (POLS) and Hausman Test were utilised to determine the most appropriate model. Accordingly, Fixed Effect Model (FEM) was the best fit in this study. Results showed that Earnings Volatility (EV) and Dividend Per Share (DPS) had a positively significant relationship while the Dividend Payout Ratio (DPR) negatively correlated with shareholder wealth. Notably, the results show that DPS was the most significant factor associated with shareholder wealth. Future research may employ a larger sample size to increase the number of observations by enhancing the period quarterly and considering other sectors to be examined.