Dividends, Leverage and Endogeneity: A Simultaneous Equations Study on Malaysia

Ghasemi, Maziar; Razak, Nazrul Ab; Muhamad, Junaina

doi:10.14453/aabfj.v12i1.4

Cited by 5 publications

(4 citation statements)

References 18 publications

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“…The current study's model includes dividend payout as a dependent variable. Dividend payouts are cash distributions made by the target firms throughout the study period in which firms give a percentage of their earnings to shareholders as compensation for the amount of capital invested (Ghasemi et al, 2018;Kalcheva and Lins, 2007). The study model also includes four control variables: firm size, return on assets, firm growth and audit quality.…”

Section: Measurement Of Variablesmentioning

confidence: 99%

Nexus among board characteristics, earnings management and dividend payout: evidence from an emerging market

Afifa

Saleh

Al-shoura

et al. 2022

IJOEM

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PurposeThe direct nexus between board characteristics, earnings management (EM) practices and dividend payout is examined in this study, followed by an examination of the indirect mediation impact of EM practices in the nexus between board characteristics and dividend payout. It aims to provide new empirical evidence from the Jordanian market, which is an emerging market.Design/methodology/approachThe study population consists of all service firms that were listed on the Amman Stock Exchange (ASE) between 2012 and 2019. Due to the lack of availability of their complete data during the period, four service firms were omitted from the population; hence, a sample of 43 service firms was acquired over the time frame (2012–2019), yielding a total of 344 firm-year observations. Moreover, panel data analysis was employed in this study, and data for the study were acquired from yearly reports as well as the ASE's database.FindingsBased on the GMM estimator findings, board size and independence have a negative and significant influence on the EM, but CEO/chairman duality has a positive and significant impact. Simultaneously, the impacts of female representation on the board of directors and the number of board meetings were both positive but insignificant. The findings also found that four board characteristics, including board size, female representation on the board of directors, CEO/chairman duality and the number of board meetings, had a significant negative or positive effect on dividend payout, while board independence did not. Additional findings show that EM practices have a direct negative insignificant effect on dividend payout, whereas EM practices partially mediate the relationship between board characteristics and dividend payout.Research limitations/implicationsThe current study's limitation is that it only searched in Jordanian service firms listed on ASE from 2012 to 2019 to fulfill the study's objectives; thus, we urge that future work explores the study models for other sectors, whether in Jordan or other growing markets such as the Middle East and North Africa.Practical implicationsThe findings of this study may be utilized by analysts, investors and other strategic decision-makers to enhance Jordan's financial market's efficiency and efficacy. These findings will improve policymakers' willingness to impose appropriate constraints, perhaps boosting Jordan's financial market performance and efficacy. These findings may also help investors make more enlightened judgments by utilizing board characteristics and EM factors that predict firm dividend policy.Originality/valueContradictions in the results of earlier investigations inspired the current study, with the findings filling a gap in the existing literature. This study differs from previous studies by constructing a novel research model and analyzing the mediating influence of EM in the nexus between board characteristics and dividend payout.

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Section: Measurement Of Variablesmentioning

confidence: 99%

Nexus among board characteristics, earnings management and dividend payout: evidence from an emerging market

Afifa

Saleh

Al-shoura

et al. 2022

IJOEM

View full text Add to dashboard Cite

show abstract

“…In particular, the study examined dividend policy according to the potential effect of the financial structure decision, firm performance, and governance indicators, with a greater concentration on leverage as a measure of the financial structure decision. Based on prior research on dividend payments, the study used pooled ordinary least squares (OLS), which is employed frequently to identify the variation nexus between dividend policy and the financial structure decision, as well as consider other dividends' determinants, such as firm performance and governance indicators (see Baskin 1989;Becker et al 2011;Ghasemi et al 2018;Dang et al 2019). Hence, the following equation presents the linear regression model:…”

Section: Model Specificationmentioning

confidence: 99%

The Effect of the Financial Structure Decision and Governance Mechanism on Shareholders' Wealth: Nonlinearity Evidence from a Petroleum‐based Economy

Shaddady

2022

Asia-Pac J of Fin Stud

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This study was designed to determine the nature of the association between the financial structure decision and shareholders' wealth—dividend payments—of firms listed on one of the largest stock markets in oil‐based economies, the Saudi stock market. The study used panel data for all nonfinancial firms listed in Saudi Arabia's primary stock market (TASI) during the period from 2000 to 2018. The pooled ordinary least squares, quantile, generalized method of moments and U‐tests were conducted to evaluate the association between the financial structure decision and dividend payment. The preliminary findings revealed a positive effect of financial leverage on dividend payments using a linear model. However, when a nonlinear model was used, the study found a nonlinear relation between the financial structure decision and dividend payouts, which exhibited an inverted U‐shaped curve driven by levels of debt. This nonlinear relation verifies the tenets of the trade‐off theory of optimum debt level based on the costs and benefits of the debt. Further, the study found a negative influence of firm performance, size, and age on dividend payments. The outcomes of this study may provide useful insights for policymakers, managers, and lenders into the optimal level of financial leverage and efficient dividend policies.

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“…They suggested that debt and dividends are complementary policies to reduce agency costs. Ghasemi et al (2018) suggested that when ownership structure leads to align the interests of managers and owners, dividends and leverage are substitutes and when the firm's agency status call for more monitoring efforts, debt and dividends are complements. Dutta (1999), Aggarwal and Kyaw (2010), and Khan and Adom (2015) found positive relationship between dividends and capital structure.…”

Section: Interrelationship Among Dividends and Capital Structurementioning

confidence: 99%

“…As discussed in the literature review dividends and capital structure are highly confirmed as jointly determined decisions. Jensen et al, (1992), Aggarwal and Kyaw (2010), Lee et al (2016), and Ghasemi et al (2018) found that dividend policy and capital structure are co-determined. They concluded that capital structure and dividend decisions should be investigated in a simultaneous estimation technique.…”

Section: Econometric Modelmentioning

confidence: 99%

The Simultaneous Effect of Corporate Ownership on Dividends and Capital Structure: Malaysian Evidence

Saleh

Ibrahim²,

Shahar³

2020

IJFR

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Most of the researchers analyzed the impact of ownership structure on dividends and capital structure decisions separately. Drawing upon preceding empirical studies, the interdependence between dividends and capital structure raises the potential of the endogeneity bias when interdependent factors are segmented. Therefore, this study examined the effect of corporate ownership structure on capital structure and dividend policy simultaneously. This study utilized 407 Malaysian-listed firms over the period from 2012 to 2016 and adopted simultaneous modelling using 2SLS and 3SLS regression techniques. The results changed markedly in sign, magnitude and significance when moving from OLS estimator to 2SLS and 3SLS estimators. The findings show that both dividend and capital structure policies have positive interdependence. The substantial, family, government and foreign ownership affect dividends positively and capital structure negatively. The study provides various theoretical and practical implications to improve corporate governance and corporate financial policies. This study contributes to the growing literature on corporate finance and corporate ownership. Particularly, it provides simultaneous investigation on the effect of family, government and foreign ownership on dividends and capital structure for Malaysian firms.

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Dividends, Leverage and Endogeneity: A Simultaneous Equations Study on Malaysia

Cited by 5 publications

References 18 publications

Nexus among board characteristics, earnings management and dividend payout: evidence from an emerging market

Nexus among board characteristics, earnings management and dividend payout: evidence from an emerging market

The Effect of the Financial Structure Decision and Governance Mechanism on Shareholders' Wealth: Nonlinearity Evidence from a Petroleum‐based Economy

The Simultaneous Effect of Corporate Ownership on Dividends and Capital Structure: Malaysian Evidence

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