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The dividend payout policy - a study on Malaysian financial institutions


Hutagalung, S. and Yahya, Mohamed Hisham and Kamarudin, Fakarudin and Osman, Z. (2013) The dividend payout policy - a study on Malaysian financial institutions. Pertanika Journal of Social Sciences & Humanities, 21 (spec. Oct.). pp. 127-148. ISSN 0128-7702; ESSN: 2231-8534


The purpose of this study is to identify the determinants of dividend policy in Malaysian financial institutions. Panel data set were constructed from 33 financial institutions in Malaysia for a period of 10 years (2001-2010). The results show a statistically significant positive relationship between dividend policy and profitability, which implies that Malaysian financial institutions distribute higher dividends when they record higher profitability. Lagged dividend also shows a positive significant relationship with dividend policy, which implies that financial institutions in Malaysia follow a stable dividend policy that maintains regularity of dividend payments with gradual adjustments of dividend payments towards the target payout. On the other hand, leverage shows a significant negative relationship with dividend policy, which means that a riskier financial institution pays out lower dividends. In conclusion, profitability, lagged dividend and leverage are found to be the major determinants of dividend policy in relation to Malaysian financial institutions. The results support the agency cost theory, signaling theory and the free cash flow hypothesis.

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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
Publisher: Universiti Putra Malaysia Press
Keywords: Determinants; Dividend payout; Financial institutions; Malaysia; Panel data
Depositing User: Nabilah Mustapa
Date Deposited: 04 Aug 2015 07:35
Last Modified: 21 Sep 2015 03:01
URI: http://psasir.upm.edu.my/id/eprint/28370
Statistic Details: View Download Statistic

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