Dividend wealth with Asquith & Mullins (1983). Based on

Dividend policy is one of the most controversial subjects in finance (Myers & Bacon, 2004). Dividend is always unpredictable in the residual policy due to the dividend is keep growing followed by years. The effect of dividend policy on shareholders wealth is important for the planning of portfolios especially the management as well as investors. Some researchers believe that dividend policies are irrelevant in determining the wealth of shareholders while others believe that dividend policies are relevant and greatly affect the wealth of shareholders. For instances, Miller & Modigliani (1961) believe that dividend policies are irrelevant in determining the wealth of shareholders. On the other hand, Kapoor (2009), Azhagaiah & Priya (2008) and Chidinma et al. (2013) argue that dividend policies are relevant and it is significantly influence the wealth of shareholder. The researchers of Azhagaiah & Priya (2008) and Iram (2010) have different findings on the impact of dividend policy on shareholders’ wealth with Asquith & Mullins (1983). Based on Azhagaiah & Priya (2008) and Iram (2010), the authors found a significant impact of dividend policy on shareholders’ wealth however the shareholders’ wealth is not influenced by the dividend payout. On the other hand, according to Asquith & Mullins (1983) stated that excess return is positively relevant to the size of dividend payout. Subsequent increases in dividend will produce a large positive impact on shareholders’ wealth. This shows that there are different arguments in this issue and further research should be undergone in order to have better understanding on this area. Hashemijoo et al. (2012) pointed out that the dividend policy is a well-known research topic among financial research for over 50 years, it deals with a key issue for many companies, such as agency costs, clientele effect and share assessment. Hashemijoo et al. (2012) have tried to investigate the relationship between dividend policy and share price of firm but they have different results and still, there is no consensus among researchers about the impact of dividend policy on share price. A major problem is how modern finance company’s dividend policy will affect shareholders’ wealth. Its purpose is to analyze how the firm to maximize shareholders’ wealth with dividend policy and reinvestment of profits from operations (Brunzell et al., 2012). Since Miller & Modiglianni (1961) showed frictionless world is irrelevance to dividend but still companies need to pay it out at all based on the dividend basis. However, the vast majority of companies pay dividends, and they also apply a complex dividend policy. Brunzell et al. (2012) have doubt the reason why the real world is not as academic model explained by Miller – Modigliani (MM) irrelevant argument. Investors, academicians and even managers still doubt whether there is any policy that can be familiarly accepted to all and the value added to a prudently chosen dividend policy (Lease et al., 2000, pp. 407). Corporate dividend policies vary significantly across different countries (Breuer et al., 2014). Therefore, researchers still have a huge space to explore into different countries to study the relationship between the dividend policy and the market values respectively. In line with the studies of Breuer et al. (2014), there are strong systematic differences between typical values of behavioral parameters in different countries which translate into systematic differences in decision making while all individuals in a country exhibit similar preferences. According to Mohanty (1999) in India, those companies will declared the dividend to the shareholders as a percentage of the face value of the share, such as a face value with Rs 10 per share gives a 30 percent dividend; each shareholder will get Rs 3 as the dividend per share. Besides that, the payout ratio in India does not appear too much matter on it, because it is the dividend rate, rather than the payout ratio that is important to explain the dividend paying behavior of the companies. However, this practice in India is completely different from the practice which followed abroad where a company will declare the dividend to shareholder as a percentage of the profit after profit (PAT) or the net profit. In US, payout ratio is an important parameter in the dividend policy of any company. Lintner (1956) found that the profitability of U.S. companies in the sixties as a large part of the dividend distribution, but they also tried to maintain a stable dividend. Malaysian firms rely both on historical dividend and current earnings to make decision of the current period’s payment of dividend (Pandey, 2001). Other than that, there are few studies have analyzed the relationship between dividend payout and shareholders’ wealth in Malaysia. According to Azhagaiah & Priya (2008), net earnings can be divided into two parts, which are retained earnings and dividends. The retained earnings will be reinvested and treat as the source of long-term funds in a business. Meanwhile, the dividend will be paid to its shareholders to maximize their wealth, because they have invested their own money to be made better economic expectations. This allows investors to remain in skeptical payout level and affect the extent to shareholder wealth, especially in the food production sector. Furthermore, Malaysia is a multicultural country which has a food industry with a wide range of processed food with Asian tastes. The food processing industry is mainly Malaysia-owned. It is estimated that global retail sales of food is worth about $ 3.5 trillion, and the annual growth rate of 4.8% is expected will grow to $ 6.4 trillion by 2020 (Malaysian Investment Development Authority (MIDA), 2012). According to Pandey (2001), Malaysia’s food industry under consumer products sector pay highest dividends as they have fewer opportunities for growth and higher cash surplus. Thus, it is important to understand about the dividend policy in Malaysia’s food producer sector due to this may influence corporate financial decision. Since there is doubt about the relationship dividend policy and shareholders’ wealth in Malaysia’s food producer sector, there are continuing in-depth studies in order to obtain a strong theoretical and empirical analysis on dividend. Since there is no consensus between researchers on the impact of dividend policy on shareholders’ wealth particularly in Malaysia, this study therefore comes in to fill the gap. Hence, this research will further study on whether there is a relationship between dividend policy and shareholder wealth among listed companies of food producer sector in Malaysia.