ISSN: 2222-6990
Open access
The aim of this study is to explore the effect of independent directors on dividend policy among manufacturing listed companies in Malaysia. The panel data of this study was obtained from Datastream of manufacturing listed companies within the FTSE Bursa Malaysia Top 100 index over the period of 2012-2021. For this purpose, a sample of 29 companies was selected using the census method. The firm’s panel was analyzed using descriptive statistics and Pooled Ordinary Least Square (OLS). Fixed effects technique was chosen to investigate the influence of board independence on dividend policy, proxied with dividend yield and dividend per share (Market-Based Measure). Descriptive analysis presented that on average, companies’ independent directors were 48% of the board size which does not meet the 50% requirement number of independent directors as stated in the Malaysian Code on Corporate Governance 2021. In addition, the finding also shows that board independence and dividend policy is significantly and negatively related. Therefore, manufacturing companies can advocate for higher dividends by limiting a number of board independence.
Abdullah, S. N. (2016). Corporate governance mechanisms and the performance of Malaysian listed firms. Corporate Ownership & Control, 14 (1-2), 384-398.
Adeusi, S. O., Akeke, N. I., Aribaba, F. O., & Adebisi, O. S. (2013). Corporate Governance and Firm Financial Performance: Do Ownership and Board Size Matter? Academic Journal of Interdisciplinary Studies, 2(3), 251.
Al Shabibi, B. K., & Ramesh, G. (2011). An empirical study on the determinants of dividend policy in the UK. International Research Journal of Finance and Economics, 80(12), 105-124.
[Record #16 is using a reference type undefined in this output style.]
Borhanuddin, R. I., & Pok, W. C. (2011). Cash holdings, leverage, ownership concentration and board independence: Evidence from Malaysia. Management & Accounting Review, 10(1), 1-26.
Borokhovich, K. A., Brunarski, K. R., Harman, Y., & Kehr, J. B. (2005). Dividends, corporate monitors and agency costs. Financial Review, 40(1), 37-65.
Chuah, X. M., Cha, P. C., Ho, W. L., Ku, P. T., & Ng, K. W. (2015). The effect of corporate governance on dividend policy: trading/services sector in Malaysia UTAR].
Clifford, P., & Evans, R. (1997). Non?executive directors: a question of independence. Corporate Governance: An International Review, 5(4), 224-231.
Commission, S. A. E. (2012). Malaysian Code on Corporate Governance. https://www.sc.com.my/regulation/regulatory-faqs/malaysian-code-on-corporate-governance-2012
Duygun, M., Guney, Y., & Moin, A. (2018). Dividend policy of Indonesian listed firms: The role of families and the state. Economic Modelling, 75, 336-354.
Hashemijoo, M., Ardekani, M. A., & Younesi, N. (2012). The impact of dividend policy on share price volatility in the Malaysian stock market. Journal of business studies quarterly, 4(1).
Nguyen, H. A., Thuy Doan, D., & Ha Nguyen, L. (2020). Corporate governance and agency cost: Empirical evidence from Vietnam. Journal of Risk and Financial Management, 13(5), 103.
Iqbal, K. (2013). Determinants of organizational justice and its impact on job satisfaction. A Pakistan base survey. International review of management and business research, 2(1), 48-56.
Khan, H., Bajuri, N. H., Yoke, L. B., & Khan, F. (2014). Do market power, board composition and ownership concentration influence dividend policy?(An empirical study of Malaysian industrial sector). International Journal of Information processing and management, 5(3), 1.
Kilincarslan, E. (2021). The influence of board independence on dividend policy in controlling agency problems in family firms. International Journal of Accounting & Information Management, 29(4), 552-582.
Malaysia, S. C. (2021). Malaysian Code on Corproate Governance. https://www.sc.com.my/api/documentms/download.ashx?id=239e5ea1-a258-4db8-a9e2-41c215bdb776
Mansourinia, E., Emamgholipour, M., Rekabdarkolaei, E. A., & Hozoori, M. (2013). The effect of board size, board independence and CEO duality on dividend policy of companies: Evidence from Tehran stock exchange. International Journal of Economy, Management and Social Sciences, 2(6), 237-241.
Nurdin, D., & Kasim, M. Y. (2017). Moderator Effect of Corporate Governance on the Relationship of Financial Performance and Dividend Policy, and Its Impact on Firm Value in Indonesia Stock Exchange. International Journal of Economics & Management Sciences, 7(1), 1-7.
Olabode, O. E., Boso, N., Hultman, M., & Leonidou, C. N. (2022). Big data analytics capability and market performance: The roles of disruptive business models and competitive intensity. Journal of Business Research, 139, 1218-1230.
Ramasamy, B., Ong, D., & Yeung, M. C. (2005). Firm size, ownership and performance in the Malaysian palm oil industry. Asian Academy of Management Journal of Accounting and Finance, 1, 181-104.
Shafana, M., & Safeena, S. (2019). Board independence and dividend policy in listed non-financial companies in Sri Lanka. Iconic Research and Engineering Journals, 2(11), 134-143.
Sharma, V. (2011). Independent directors and the propensity to pay dividends. Journal of Corporate finance, 17(4), 1001-1015.
Shehu, M. (2015). Board characteristics and dividend payout: Evidence from Malaysian public listed companies. Research Journal of Finance and Accounting, 6(16), 35-40.
Sinnadurai, P., Subramaniam, R., & Devi, S. (2021). The influence of government shareholding on dividend policy in Malaysia. International Journal of Financial Studies, 9(3), 49.
Subramaniam, R., Devi, S. S., & Marimuthu, M. (2011). Investment opportunity set and dividend policy in Malaysia.
Tahir, H., Masri, R., & Rahman, M. M. (2020). Impact of board attributes on the firm dividend payout policy: evidence from Malaysia. Corporate Governance: The International Journal of Business in Society, 20(5), 919-937.
Tahir, H., Rahman, M., Masud, M. A. K., & Rahman, M. M. (2023). Unveiling the Link between Corporate Board Attributes, Board Behavior, and Financial Leverage: Insights from Malaysia. Journal of Risk and Financial Management, 16(4), 237.
Thompson, E. K., & Manu, A. S. (2021). The impact of board composition on the dividend policy of US firms. Corporate Governance: The International Journal of Business in Society, 21(5), 737-753.
Yoong, L. C., Alfan, E., & Devi, S. S. (2015). Family firms, expropriation and firm value: Evidence from related party transactions in Malaysia. The Journal of Developing Areas, 49(5), 139-152.
Zhao, Y., & Ng, S. H. (2021). Dividend payout policies in the pre and post split share structure reform in China. Cogent Economics & Finance, 9(1), 1923620.
(Devia et al., 2024)
Devia, S., Ramakrishnana, S., Mustafaa, Z., & Samiullah. (2024). The Effect of Board Independence on Dividend Policy among Manufacturing Listed Companies in Malaysia. International Journal of Academic Research in Business and Social Sciences, 14(1), 1594–1604.
Copyright: © 2024 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode