Impacts of Debt Maturity and Government Ownership on Dividend Policy: Evidence from Malaysian Stock Market

Teng, Chee Keong (2019) Impacts of Debt Maturity and Government Ownership on Dividend Policy: Evidence from Malaysian Stock Market. Masters thesis, Tunku Abdul Rahman University College.

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Abstract

The classical paper, Black (1976) stated that “The harder we look at the dividends picture, the more it seems like a puzzle, with pieces that just do not fit together.” The classical paper has no doubt opened a new research area on the factors that impact an organization’s decision on dividend policy. Since then, plentiful research on dividend policy have been done and the famous dividend puzzle has still yet to be perfectly solved. There have been limited studies in Malaysian firms on determinants of dividend payout. Hence, this paper intends to contribute empirical evidence to existing literature in Malaysian stock market. The two main objectives of this study are to examine if the debt maturity and government ownership are having significant relationship with the dividend payout of firms in Malaysian stock market. In addition, all other relevant variables derived from dividend theories and literature review are also included in order to perform a more thorough study. In this paper, panel data analysis is used as the main econometric method. Financial data covering the top 100 largest market capitalization public listed firms in the Bursa Malaysia main market from 2014 to 2018 is collected and balanced panel data is used in this study to examine the relationships between dividend payout and independent variables in Malaysian stock market. Panel data estimators are used including Pooled Ordinary Least Squares (OLS), fixed effects, and random effects models. The findings of this study show that government ownership and firm size are having significant relationships with dividend payout of firms in Malaysian stock market. There is a significant positive relationship between government ownership and dividend payout of a firm. It indicates that a firm tends to pay more dividends if it is a Government-Linked Companies (with more than 20% shareholding is held by Government-Linked Investment Companies). The findings support clientele effects of dividends hypothesis. Besides, firm size is having a significant negative relationship with dividend yield of firms in Malaysian stock market. Keywords: Dividend Policy, Debt Maturity, Government Ownership, Panel Analysis, Pooled OLS, Fixed Effects Model, Random Effects Model