DIVIDEND POLICY, SIZE AND SHARE PRICE: TH PLANTATIONS BERHAD VERSUS PROFITABLE COMPANIES AT BURSA MALAYSIA

Abstract

This study is inspired by the motivation to investigate the theoretical relevance of dividend policy, firm size and share price of top businesses at Bursa Malaysia. Within the bird-in-hand theory on dividend and market share profitability hypothesis, this research adopts the Generalized Method of Moments (GMM) as an estimating model exploiting yearly data from 2015 through 2020. The empirical results from GMM clearly show that dividend per share (DPS) and size (as proxied by sales) do influence the performance (as proxied by closing share price) of the selected companies across the different sectors. As such, the dividend hypothesis and size are relevant in explaining changes in share values. Although DPS is our control variable, size does  have a significant positive impact on a firm's success. However, the lag-closing price variable demonstrates otherwise. In a nutshell, the empirical evidence from this study reveals a breach of the Efficient Market Hypothesis which suggests that Bursa Malaysia is informationally inefficient in semi-strong form. Size is a crucial explanatory variable that impacts a firm's performance. TH Plantations Berhad should mimic the sales techniques implemented by these top businesses at Bursa Malaysia to sustain its long-term growth.