The Effect of Dividend Policy on Share Prices of Bursa Malaysia Listed Companies

The effect of dividend policy on share price movement is one of the most hotly disputed topics in corporate finance. The share price has been the most common starting point for investors when make decision to buy share because it represents all aspects, both internal and external factors. There are various empirical studies that researchers can refer to in order to examine and analyse the effect of dividend policy on share prices, however the results are inconsistent. This study is focused on this issue. The purpose of this study is to look at the effect of dividend policy on the share price of companies listed on the FTSE FBM100 index from 2011 through 2020. The dependent variable is share prices whereas dividend payout, dividend yield, return on invested capital, free cash flow yield, volume traded, and company size based on market capitalization are independent variables. The number of the samples in this study are 56 companies by using the regression model. According to the results of panel data regression model indicates that dividend payout has an insignificant effect on share prices, however, dividend yield has negative and significant effect on share price. Return on invested capital, volume traded, and company size by market capitalization are significant effect on share price while free cash flow yield is insignificantly effect. As a result, we find that dividend policy has considerable impact on share prices, demonstrating that dividend policy is important. The findings of this study are expected to serve as a reference for companies in establishing dividend policies that will improve company performance and for investors in considering whether it should retain, increase or decrease their stake in the company.