The impact of dividend policy on shareholders' wealth in Malaysian consumer product industry / Ummi Harnani Mohammad Jauhari

Dividend policy is indeed one of the most controversial issues in an organization. Dividend payment and company’s earnings have become one of the most concerning subjects to shareholders in company. The way on how company decided to spend their net profit, either by declaring dividend distribution or reinvestment for future capital gains, both will have direct effect on shareholders’ wealth. This study aims to examine the impact of dividend policy on shareholders’ wealth in Malaysian Consumer Product Industry. Dependent variables in this study are earning per share (EPS) and dividend per share (DPS) whilst dividend payout ratio (DPR), return on equity (ROE) and retention ratio (RR) are the independent variables. The data for all variables in this study has been collected through Thomson Reuters Datastream. 100 companies listed in Bursa Malaysia particularly in Consumer Product Industry have been selected as sample of this study starting from the year of 2011 to 2015. Descriptive statistic, correlation and regression analysis have been conducted in order to identify the impact of dividend policy on shareholders’ wealth. The findings of this study show that there is positive and significant relationship between EPS and DPS. Nevertheless, DPR has showed negative significant relationship with EPS. Besides, there is insignificant yet positive relationship between EPS and ROE. On the other hand, RR has showed negative and insignificant relationship with EPS. From the regression’s analysis, it is found that DPS is the most significant factor that influences shareholders’ wealth. This study is beneficial to the policy makers, managers, shareholders and academicians.