Board Structure, Capital Structure and Dividend Per Share: Is there Interaction Effect?

Abstract

This study examines the direct effects of firm�s characteristics such as board structure and capital structure on divided per share as a proxy of firm�s performance and interaction between board structure and capital structure on dividend. The fixed effect regression uses a sample of 361 non-financial Malaysian listed firms over the period of 2002 to 2007. The decision made by the board of directors with duality role of Chairman cum Chief Executive Officer and larger board size to pay dividend demonstrates that duality role of chairman cum chief executive officer have negative effect on dividend payment but not outside independent director(s). The interaction between board structure namely duality, independent directors, board size and capital structure namely debt ratio reveals that duality weakens the negative effect of debt ratio on dividend while independent directors strengthens the negative effect of debt ratio on dividend payment. Overall, the results of this study may be summarized to suggest that distributable income to shareholders increases through a balanced financing decision between capital structure choice and dividend payment made by the board of directors that possessed duality role.