Influence of Institutional Investor Heterogeneity on Dividend Payout and Stability in Malaysia

Cheng, Pui Chin (2025) Influence of Institutional Investor Heterogeneity on Dividend Payout and Stability in Malaysia. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

Institutional investors are organisations or entities that pool substantial financial resources to invest on behalf of others, including pension funds, mutual funds, insurance companies, endowments, hedge funds and investment banks. These investors operate on a large scale, managing significant assets and executing substantial transactions in the financial markets. As major shareholders in publicly traded companies, institutional investors wield considerable influence over corporate decisions, including dividend policies. Their investment preferences and strategies play a crucial role in shaping firms’ approaches to dividend payout policies, where some prioritise stable and consistent dividends to meet long-term financial commitments, while others focus on capital appreciation, favouring reinvestment over immediate distributions. These differing objectives create variations in how institutional investors influence corporate dividend policies. Given this diversity, this study examines the influence of institutional investor heterogeneity on dividend payout and stability. This study is based on a randomly selected sample of 100 non-financial firms listed on Bursa Malaysia from 2016 to 2023. In this study, the pooled ordinary least squares method has been used. According to the research findings, this study finds no significant relationship between state-owned institutional investors and dividend payout. However, privately managed institutional investors are shown to have a significant influence on dividend payout. Similarly, no significant relationship is observed between pressure-resistant institutional investors and dividend payout. By contrast, pressure-sensitive institutional investors demonstrate a significant positive relationship with dividend payout. As regards dividend stability, the findings indicate no significant relationship between any of the institutional investor groups and dividend stability. Several important implications can be drawn from this study. First, it may offer policymakers valuable insights for refining regulations that consider the diverse roles of institutional investors in corporate governance, particularly in shaping dividend policies. Additionally, the findings may help public listed firms better understand the preferences and behaviours of different institutional investors, enabling them to align dividend strategies with shareholder expectations. Finally, this study may provide both institutional and retail investors with a clearer understanding of how to refine their investment strategies and identify firms that signal potential for high dividend payouts.