Different types of investors tend to be attracted to different types of the firms. When investors choose to invest in common stocks, they always look at the firm's earnings. Even though a company does not have to show a profit to pay dividends, profits are still considered a vital link in the dividend decision (Gitman & Joehnk, 2008). EPS provides a convenient measure of the amount of earnings available to stockholders. The stockholders of company look at EPS to estimate growth which will affect future stock price. It is because EPS is considered one of the primary driving forces behind stock price. Past performance of EPS can be a good indicator for future performance.
Nowadays, investor or stockholder not only look at net income, return on equity or investment in securities to measure performance of that company. Earnings per share are another factor to be considered by them to measure the strength of company. Therefore, this research will identify the strength of Public Bank Berhad using EPS as indicator. The factor such as number of share outstanding, net income and tax expenses may influence EPS to increase or decrease.
Thus, this research is conducted to identify dividends paid, retained earnings and tax expenses. The three variable used in this research is to know whether all of them influence earnings per share of Public Bank Berhad or not.
BACKGROUND OF COMPANY
One of commercial bank that has good financial performance in Malaysia is Public Bank Berhad. Public Bank Berhad located in Jalan Ampang,Kuala Lumpur. This bank ranked third in term of asset among the banking group. Public Bank Berhad operates in six segments that are hire purchase operations, retail operations, corporate lending operations, treasury and capital operations, investment banking operations and fund management operations. For 2009, on the back of a strong 10.2% growth in net interest and financing income, Public Bank Berhad pre-tax profit is RM3.32 million. Total asset increase from RM196.16 billion in 2008 to RM217.14 billion in 2009. It shows that Public Bank Berhad has a strong financial performance.
Since 1966, Public Bank Berhad has won many award such as became the largest banking group in Malaysia by market capitalization and 1st Malaysian bank to issue innovative hybrid Tier-1 capital securities in both the international market in US Dollars of USD200 million and in the domestic market in Ringgit of RM1.2 million. The Public Bank Berhad's EPS keep on increasing from year to year show that this company has a good and strong financial performance. Other than that, Public Bank Berhad is the bank that have the lowest amount of non-performing loan among commercial bank in Malaysia.
PERFORMANCE OF EPS FOR PUBLIC BANK BERHAD
GRAPH 1 - Performance of Earnings per Share
Graph 1 shows the trend of earnings per share from 1998 until 2010. The highest value is 83.8 for 2010 whereas the lowest EPS declared on 1998 by 2.3. The Public Bank declares the highest EPS in 2010 because the bank has a strong financial performance. The shareholders' fund grew in tandem with the strong underlying profits recorded for. EPS is lower in 1998 is because Malaysia has faced financial crisis in 1997. So, there have some effect for Public Bank Berhad in the next year, 1998.
PROBLEM STATEMENTS
EPS is considered one of the primary forces behind share market price. Company who declare higher EPS is a company that has a good financial performance such as Public Bank Berhad. Sometimes people think that companies which have high profit will have high EPS. Actually, number of outstanding common stock will influence company to declare higher or lower EPS. Other than that, there are several factor that influence EPS. Problem statements are developed to analyze the factors that influence earnings per share.
Does dividends paids leads to changes in earnings per share of Public Bank Berhad?
Does a retained earnings influence earnings per share of Public Bank Berhad?
Does amount of tax expenses may decrease earnings per share of Public Bank Berhad?
OBJECTIVE OF STUDY
GENERAL OBJECTIVE
To study the relationship between dividends paid, tax, and retained earnings towards earnings per share of Public Bank Berhad.
SPECIFIC OBJECTIVES
To determine the relationship between dividends payable and EPS of Public Bank Berhad.
To identify whether tax expenses has significant impact on EPS of Public Bank Berhad.
To find out whether retained earning influence EPS of Public Bank Berhad.
SCOPE OF STUDY
The scope of this study analyzes 13 years financial performance of Public Bank Berhad. It is cover from 1998 until 2010. For the purposed of this study, the researcher used three (3) independent variables, which are dividends paid, retained earnings and tax expenses. This study will focus on the earnings per share which is related to dividends paid and retained earnings. Tax expenses also have an impact on earnings per share because it reduced net profits of the company.
SIGNIFICANT OF STUDY
This study is conduct to analyze the factors that contribute EPS of Public Bank Berhad. The outcome of this study will assist information for;
University
This study will provide more information about earnings per share. Other student will have more references in the future about factor that influencing earnings per share. They will used to help them in conducting other research in the same field. Other than that, university also can use to increase reading material in library.
Banking Sector
This outcome of this study will help banking sector to maintain or improve earnings and other factor that will lead to the higher EPS. It is important because higher EPS will show that the bank performance is good.
Management Team of Public Bank Berhad
This study is a case study of Public Bank Berhad. All information gathered is related to Public Bank Berhad. So, this study is useful for management team of Public Bank Berhad to let them know about the factors that contribute the earning per share. They also can make corrective action to improve their financial position in order to declare higher EPS in future.
LIMITATIONS OF STUDY
Variables
This study only considers three (3) important variables. There have some others variables that influence earning per share but it is not too much.
Lack of data
Data for this study was obtained from internet source that is website of Public Bank Berhad. The sources of data are very limited. Some data are not published in the internet anymore. In the website of Public Bank Berhad, there provides 3 years only annual report.
Accuracy of data
The data is secondary data because it is gathered from internet sources. So, the accuracy data depends on the published materials. Sometimes data are not available for that time of period. So, it will affect the accuracy of the result.
