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Future earnings growth and dividend payout: Evidence from Malaysia

Taufil Mohd, Kamarun Nisham and Zaharudin, Khairul Zharif (2019) Future earnings growth and dividend payout: Evidence from Malaysia. Management Science Letters, 9. pp. 347-356. ISSN 19239335

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This study investigates the effect of dividend payout on firms’ future earnings growth (FEG) in Malaysia. We use panel data analysis methodology to determine the effect of dividend payout and other control variables on FEG in 1, 2, 3, 4, and 5 years. Our results show that firm size and payout ratio had significant positive relationship on four out of five dynamic models tested. The remaining factors except of debt ratio are significant at least four out of the five years used in dynamic models in this study. We find evidence that Malaysian firms show mean reversion pattern in their earnings; smaller firms would enjoy greater future earnings growth; increased monitoring from creditors leads to better earnings performance; firms with better investment prospect have greater future growth in earnings; and higher investment in assets leads to higher future earnings growth. The findings show that in Malaysia, managers use dividend as a tool to signal their positive private information about the firms’ future prospect.

Item Type: Article
Uncontrolled Keywords: Future earnings growth, Dividend payout, Dividend policy, Emerging markets, Panel data analysis
Subjects: H Social Sciences > HC Economic History and Conditions
Divisions: School of Economics, Finance & Banking
Depositing User: Mrs. Norazmilah Yaakub
Date Deposited: 09 Sep 2020 03:19
Last Modified: 09 Sep 2020 03:19

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