Agency Conflicts, Dividend Payments, and Ownership Concentration in Comparison of Shariah and Non-Shariah Compliant Listed Companies

Abstract

Objective - The study analyzes the agency cost, dividend payments, and ownership concentration compared to Shariah and non-Shariah listed companies. Furthermore, this paper also seeks to examine the efficiency of managers in generating and utilising revenues to pay for operating expenses by comparing shariah and non-shariah compliant companies in determining any occurrences of agency conflicts. Methodology/Technique – The sampling data were extracted from the Thomson Refinitiv Eikon Database for 5 years, from 2016 until 2020, for 567 Malaysian listed companies with a total of 2835 observations. The research implemented a One-way analysis of variance (ANOVA) to analyse the data. Findings – ANOVA tests have shown that both Shariah and non-Shariah compliant companies pay dividends to their shareholders on average between 29 percent to 35 percent on returns. Interestingly, the decisions to pay the shareholders show that the shariah-compliant companies are more likely to pay out dividends than their non-shariah counterparts. Revenue generation is also found to be higher by 62 percent. Shariah-compliant companies demonstrate statistically significant higher dividends with better asset usage or lower agency conflicts in Malaysia. Novelty - This paper is novel as it provides a thorough baseline analysis of the significant difference in agency conflicts, using both proxies, which are the dividend payments and the efficiency ratios, taking into consideration all the industries of the Shariah and non-Shariah listed companies in Malaysia. Type of Paper: Empirical J.E.L. Classification: C87, G10, G32, G35 Keywords: Agency conflicts; Shariah and non-shariah public listed companies; dividend and asset utilisation ratio; concentrated ownerships Reference to this paper should be referred to as follows: Ahmad, D.E.N.A; Banchit, A; Johari, A. (2022). Agency Conflicts, Dividend Payments, and Ownership Concentration in Comparison of Shariah and Non-Shariah Compliant Listed Companies, Acc. Fin. Review, 7(2), 124 – 134. https://doi.org/10.35609/afr.2022.7.2(5)