AN EMPIRICAL STUDY OF DIVIDEND PAYOUT POLICY IN SINGAPORE

Abstract

This is a study based on the Singapore market and focuses on the dividend policies of firms listed on the Singapore Stock Exchange (SGX) from fiscal year 2004 to 2010, excluding financial institutions. In examining the determinants of dividend policies of firms listed in Singapore, key governance and shareholding characteristics were obtained from the firms’ annual reports and regression tests were carried out with the firm’s dividend payout ratio. Government ownership of the firms was also discussed using the presence of Temasek Holdings as one of the top 3 shareholders of the listed firm as an indicator. It was found that corporate governance, and similarly, government ownership are both positively associated with dividend payouts. Ownership concentration also varies positively with dividend payouts, and for government-owned firms as determined by the indicator as explained above, we find that clientele needs may be a factor in explaining the higher dividends as well. Lastly, this study also investigates the dividend signalling effect among firms listed on the SGX. The regression results show that the current year’s dividend payout ratio is positively associated with future profitability up to a maximum time frame of two years later, where we use changes in return of assets as an indicator of future profitability.