Determinants of Dividend Policy: Evidence from Malaysian Public Listed Companies

Abstract

Dividend policy has become one of the important issues in any corporation since it relates to investment and financing decisions that a firm makes. It is crucial for a firm to build a strong understanding of dividend policy as corporate dividend policy gives a huge impact on a firm’s decision in key areas such as capital budgeting, asset pricing, mergers and acquisitions, and capital structure. The aim of this study is to examine the factors that will determine dividend policy decisions made by public listed companies in Malaysia. Among the variables included in this study are leverage, liquidity, profitability, firm size and corporate tax. Quantitative research method was chosen for this study and eighty-three (83) public listed companies in Malaysia were selected as a sample size based on annual data during 2013-2017. Multiple regression analysis was used to test research hypotheses. Other tests including Diagnostic test, Normality test, Multicollinearity test, Autocorrelation test, and Pearson’s Correlation coefficient analysis were also conducted in this study. The findings revealed that leverage and liquidity which were measured by debt to equity ratio and current ratio, respectively, have insignificant impact on dividend policy which was measured by dividend payout ratio. This study also provide new insights into profitability, tax, and firm size which were measured by return on equity (ROE), corporate tax, and ln(total assets) have a significant positive relationship with dividend policy. Future research on the determinants influencing dividend policy may take governance structure types into account. This is owing to the fact that businesses operate in various governance systems with varying types and histories in various industries and nations, which may result in varying representations of dividend policy.