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Dividends, leverage and endogeneity: a simultaneous equations study on Malaysia


Ghasemi, Maziar and Ab Razak, Nazrul Hisyam and Muhammad, Junaina (2018) Dividends, leverage and endogeneity: a simultaneous equations study on Malaysia. Australasian Accounting, Business and Finance Journal, 12 (1). pp. 47-64. ISSN 1834-2000; ESSN: 1834-2019


Drawing upon preceding empirical studies on the potential endogeneity of both debt and dividends in developed markets, this study investigates two-way causal relationships that can exist between payout decisions and debt policies in Malaysian listed companies. The analysis is performed by applying a simultaneous equations model (SEM) on a sample of 267 listed firms on the Main board of Bursa Malaysia during 2006–2014. The main findings indicate that when dividend is treated as endogenous, there is a positive impact on leverage. However, leverage is found to have a simultaneous negative impact on dividends. The findings also show that liquidity and performance positively affect dividends, although they have a negative effect on leverage. Additionally, this study documents an inverse relation between tangibility and debt, a direct relation between reputation and debt, and also confirms that larger firms tend to pay out a higher percentage of dividends per share.

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Official URL or Download Paper: http://ro.uow.edu.au/aabfj/vol12/iss1/4/

Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
Putra Business School
DOI Number: https://doi.org/10.14453/aabfj.v12i1.4
Publisher: University of Wollongong, Australia
Keywords: Agency theory; Bursa Malaysia; Dividends; Endogeneity; Leverage; Simultaneous equations models
Depositing User: Nabilah Mustapa
Date Deposited: 07 Jun 2018 08:45
Last Modified: 07 Jun 2018 08:45
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.14453/aabfj.v12i1.4
URI: http://psasir.upm.edu.my/id/eprint/60596
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