The Paradox of Managerial Dividend Policy in Corporate Malaysia
DOI:
https://doi.org/10.26710/reads.v5i1.394%20%20Keywords:
Devolution Dividend Policy, Firm Value, Malaysia.Abstract
The prime objective of this paper is to survey the managers of Bursa Malaysia listed non-financial firms and to divulge their views regarding the significance of various potential factors that may affect dividend decisions. In addition to that, we are also interested in highlighting that how managerial perception about the importance of these factors varies from country to country. Our next objective is to know the level of importance, Malaysian managers give to dividend processes and pattern, firm value. Dividend policy (DP) and residual dividend policy (RDP). Finally, we are interested in measuring the level of support that Malaysian managers provide for different justifications for the payment of dividends. Survey instrument including a cover letter was mailed to chief finance officers (CFO) and finance managers of 493 Bursa Malaysia listed firms in October 2017. In the cover letter, a request was made to all respondents that in case of their non-involvement in dividend decision the letter must be forwarded to concerned authority involved in dividend decisions. The response rate of the current study is 40.09 percent (202 out of 493 firms). The study has used a mail survey of Bursa Malaysia listed non-financial firms that have paid at least one cash dividend during the period of 2013-2016 as a primary means of collecting data. No single pattern in rankings of factors among different countries has emerged. However, like their American, Canadian and Indonesian counterparts, According to Malaysian managers, dividend decisions have a significant effect on firm value. Although, a great deal of support has already been established with all dividend theories, however clientele and agency theory has proven to be the strongest one.
References
Baker, H. K., &Weigand, R. (2015).Corporate DPrevisited. Managerial Finance, 41(2), 126-144.
Baker, H. K., Kilincarslan, E., &Arsal, A. H. (2017).DPin Turkey: Survey evidence from Borsa Istanbul firms. Global Finance Journal.
Baker, H.K., and Powell, G.E. (2000), ‘‘Determinants of corporate dividend policy: a survey of NYSE firms’’, Financial Practice and Education, Vol. 10 No. 1, pp. 29-40.
Baker, H.K., Powell, G.E. and Veit, E.T. (2002), ‘‘Revisiting the dividend puzzle: do all of the pieces now fit?’’, Review of Financial Economics, Vol. 11 No. 4, pp. 241-61.
Baker, H.K., Saadi, S., Dutta, S. and Gandhi, D. (2007), ‘‘The perception of dividends by Canadian managers: new survey evidence’’, International Journal of Managerial Finance, Vol. 3 No. 1, pp. 70-91.
Baker, H.K., Singleton, J.C. and Veit, E.T. (2010), Survey Research in Corporate Finance: Bridging the Gap between Theory and Practice, Oxford University Press, Oxford.
Baker, H.K., Veit, E.T. and Powell, G.E. (2001), ‘‘Factors influencing DPdecisions of Nasdaq firms’’, Financial Review, Vol. 36 No. 3, pp. 19-37.
Baker, M. and Wurgler, J. (2004a), ‘‘A catering theory of dividends’’, Journal of Finance, Vol. 59 No. 3, pp. 1125-65.
Baker, M. and Wurgler, J. (2004b), ‘‘Appearing and disappearing dividends: the link to catering incentives’’, Journal of Financial Economics, Vol. 73 No. 2, pp. 271-88.
Baker, M., &Wurgler, J. (2004).A catering theory of dividends. The Journal of Finance, 59(3), 1125-1165.
Basheer, M. F. (2014). Impact of Corporate Governance on Corporate Cash Holdings: An empirical study of firms in the manufacturing industry of Pakistan. International Journal of Innovation and Applied Studies, 7(4), 1371.
Basheer, M. F., Ahmad, A. A., & Hassan, S. G. (2018). How managerial view the dividend policy: A case of UAE. Opción, 34(16), 630-645.
Bhattacharya, S. (1979), ‘‘Imperfect information, DPand the ‘bird in the hand’ fallacy’’, Bell Journal of Economics, Vol. 10 No. 1, pp. 259-70.
Black, F. (1976), ‘‘The dividend puzzle’’, Journal of Portfolio Management, Vol. 2 No. 2, pp. 5-8.
DeAngelo, H., DeAngelo, L., & Skinner, D. J. (2004). Are dividends disappearing? Dividend concentration and the consolidation of earnings.Journal of financial economics, 72(3), 425-456.
Fama, E. F., & French, K. R. (2001). Disappearing dividends: changing firm characteristics or lower propensity to pay?.Journal of Financial economics, 60(1), 3-43.
Felimban, R., Floros, C., & Nguyen, A. N. (2018). The impact of dividend announcements on share price and trading volume: Empirical evidence from the Gulf Cooperation Council (GCC) countries. Journal of Economic Studies, 45(2), 210-230.
Gordon, M.J. (1962), ‘‘The savings, investment, and valuation of a corporation’’, Review of Economics and Statistics, Vol. 44 No. 1, pp. 37-51.
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American economic review, 76(2), 323-329.
Jensen, M.C., and Meckling, W.H. (1976), ‘‘Theory of the firm: managerial behavior, agency costs and ownership structure’’, Journal of Financial Economics, Vol. 3 No. 4, pp. 305-60.
Kirkulak, B., & Kurt, G. (2010). Are dividends disappearing or shrinking? Evidence from the Istanbul Stock Exchange. Emerging Markets Finance and Trade, 46(2), 38-52.
Lintner, J. (1956). Distribution of incomes of corporations among dividends retained earnings, and taxes. The American Economic Review, 46(2), 97-113.
Miller, M. H., & Modigliani, F. (1961).Dividend policy, growth, and the valuation of shares.the Journal of Business, 34(4), 411-433.
Mueller, D. C. (1972).A life cycle theory of the firm. The Journal of Industrial Economics, 199-219.
Qammar, R., Ibrahim, Y., &Alam, M. M. (2017). Dividend Payment Behaviour: Evidence from Malaysia. Asian Journal of Multidisciplinary Studies, 5(3), 37-46.
Renneboog, L., &Szilagyi, P. G. (2015). How relevant is DPunder low shareholder protection?.Journal of International Financial Markets, Institutions, and Money.
Shefrin, H. M., &Statman, M. (1984).Explaining investor preference for cash dividends.Journal of financial economics, 13(2), 253-282.
Shi, W., Connelly, B. L., &Hoskisson, R. E. (2017). External corporate governance and financial fraud: cognitive evaluation theory insights on agency theory prescriptions. Strategic Management Journal, 38(6), 1268-1286.
Spencer, K. A. (1973). Agromyzidae (Diptera) of economic importance (Vol. 9). Springer Science & Business Media.
