An Empirical Study On The Relationship Between Dividend Changes and Future Earning Of The Kuala Lumpur Stock Exchange Listed Companies
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Date
2004
Authors
Lee, Vooi Ling
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Abstract
This thesis is concerned with dividend signaling hypothesis which claims that
dividends changes have information content and can be used to signal firms' future
prospects. Initially, it was found that dividend change did no.t support the signaling
hypothesis and failed to indicate future earning direction. However when the dividend
increased magnitude is taken into consideration, it signals a complex relationship.
Small dividend increases will signal future earning increases; whereas large dividend
in~reases.will signal future earning decreases. The results showed that there are
insignificant differences in dividend changes magnitude between these firms' sizes
except in dividend decreases section. Nevertheless, results indicated that small firms
have smaller dividend increment than large firms. In dividend decrease section, small
firms have significantly larger dividend cut when signaling future earning increases.
In addition, the finding also revealed that there are significant differences in dividend
changes magnitude between industry sectors to signal future earning decreases but no '
significant differences to signal earning increases. Properties sector has the largest
dividend change either in dividend increase or decrease.
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Keywords
Dividend Changes , Kuala Lumpur Stock Exchange (KLSE)