L L a a b b u u a a n n B B u u l l l l e e t t i i n n OF INTERNATIONAL BUSINESS & FINANCE Volume 5, 2007 ISSN 1675-7262 FIRM PERFORMANCE AND DIVIDEND-RELATED FACTORS: THE CASE OF MALAYSIA Swee Sim Foong a, * , Nadisah Binti Zakaria b and Hui Boon Tan c a Faculty of Accountancy and Management, Universiti Tunku Abdul Rahman b Faculty of Business and Finance, International University College of Technology Twintech c Nottingham University Business School, The University of Nottingham, Malaysia Campus Abstract The theory of dividend and its effect on the value of the firm is perhaps one of the most important yet puzzling theories in finance. The main objective of this study is to examine dividend related factors that can be relied upon when determining the value of the firm. We investigate the relationship between individual stock returns with dividend yield, dividend stability and changes in dividend yield from 1992 to 2000 in the Malaysian Trading/Services and Plantation firms. The statistical result from annually cross-sectional regression show weak evidence to support the significant role of dividend yield and dividend stability in explaining firm stock returns. Changes in dividend yield, on the other hand, have negative and significant coefficients in explaining stock returns in Trading/Services firms throughout 1993-1996 and the average crisis period. For Plantation firms, it is negatively significant only in 1994 and 1997. JEL Classifications: G10; G35 Keywords: Dividend Yield; Dividend Stability; Stock Returns * Correspondence author: Swee Sim Foong, Finance Department, Faculty of Accountancy and Management, Universiti Tunku Abdul Rahman, 43200 Kajang, Selangor. Tel: (603) 90194722; Fax: (603) 90197062. E-mail: foongss@mail.utar.edu.my