Dividends are not only a means of regular income but also an important input in the valuation of firm through the information content of dividends. This study investigates the impact of dividends on future earnings among Malaysian public listed companies from 2000 to 2020 with panel data analysis. Overall, the results show insignificant relationships between dividends and future firm performance, which refute the information content hypothesis of the signaling theory. However, sensitivity analysis among subsamples with large market capitalization, high payout frequency and those that also pursue share buyback programs portray positive and significant firm performance in the first year subsequent to dividend payment. Therefore, it is suggested that future research may examine the impacts of dividends on future firm performance over a longer period of time that exceeds one year.
Al-Shattarat, W. K., Al-Shattarat, B. K., & Hamed, R. (2018). Do dividends announcements signal future earnings changes for Jordanian firms? Journal of Financial Reporting and Accounting, 16(3), 417-442.
Baker, H. K., & Powell, G. (2009). Understanding financial management: A practical guide. New York: John Wiley & Sons.
Benartzi, S., Michaely, R., & Thaler, R. (1997). Do Changes in Dividends Signal the Future or the Past? The Journal of Finance, 52(3), 1007-1034.
Bhattacharya, S. (1979). An exploration of nondissipative dividend-signaling. Journal of Financial and Quantitative Analysis, 14(4), 667-668.
Choi, Y. M., Joo, H. K., & Park, Y. K. (2011). Do dividend changes predict the future profitability of firms? Accounting and Finance, 51, 869-891.
Clayman, M. R., Fridson, M. S., & Troughton, G. H. (2012). Corporate finance workbook: A practical approach (2nd ed.). Canada: John Wiley & Sons Inc.
Daniel, H. (2014). Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal, 4. Retrieved from http://fmwww.bc.edu/repec/bocode/x/xtscc_paper.pdf
Grullon, G., Michaely, R., Benartzi, S., & Thaler, R. H. (2005). Dividend changes do not signal changes in future profitability. Journal of Business, 78(5), 1659-1682.
Hsiao, C. (2014). Analysis of panel data (3rd ed.). Cambridge: Cambridge University Press.
John, K., & Williams, J. (1985). Dividends, dilution and taxes: A signaling equilibrium. The Journal of Finance, 40(4), 1053-1070.
Lee, B. S., & Suh, J. (2011). Cash holdings and share repurchases: International evidence. Journal of Corporate Finance, 17, 1306-1329.
Lee, S. P., Isa, M., & Lim, W. L. (2012). Dividend changes and future profitability: Evidence from Malaysia. Asian Academy of Management Journal of Accounting and Finance, 8(2), 93-110.
Lie, E. (2005). Operating performance following open market share repurchase announcements. Journal of Accounting and Economics, 39, 411-436.
Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings, and taxes. The American Economic Review, 46(2), 97-113.
Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. Journal of Business, 34(4), 411-433.
Miller, M. H., & Rock, K. (1985). Dividend policy under asymmetric information. Journal of Finance, 40, 1031-1051.
Moles, P., Parrino, R., & Kidwell, D. (2011). Corporate finance: European edition. Chichester, England: John Wiley and Sons Ltd.
Nissim, D., & Ziv, A. (2001). Dividend changes and future profitability. The Journal of Finance, 56(6), 2111-2134.
Rist, M., & Pizzica, A. J. (2014). Financial ratios for executives. US: Apress.
Tracey, A. (2012). Ratio analysis fundamentals: How 17 financial ratios can allow you to analyse any business on the planet. Washington: Penguin Group.
Vermaelen, T. (1981). Common stock repurchases and market signaling: An empirical study. Journal of Financial Economics, 9, 139-183.
Wooldridge, J. M. (2013). Introductory econometrics: A modern approach (5th ed.). Mason: South-Western Cengage Learning.
Zhou, P., & Ruland, W. (2006). Dividend payout and future earnings growth. Financial Analysts Journal, 62(3), 58-69.
In-Text Citation: (Chin et al., 2023)
To Cite this Article: Chin, C. L., Jais, M. bin, & Sahari, S. binti. (2023). The Impact of Dividends on Future Earnings: Evidence from Malaysian Public Listed Companies. International Journal of Academic Research in Business and Social Sciences, 13(2), 1472 – 1488.
Copyright: © 2023 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non0-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
