Corporate Governance and Dividend Policy in Malaysia

Abstract

this paper investigates the relationship between Investment Opportunity Set and dividend policy and if board size and board composition moderate this relationship in an emerging economy context. The free cash flow theory is empirically examined using a series of firm characteristics including size, return on assets, duality and debt to assets. The results support the theory that high growth firms make lesser dividend payouts. Further, in the interaction between high growth firms and board size and board composition, there is evidence to show that the negative relationship between Investment Opportunity Set and dividend payout is weaker for firms with a larger board size and with a corresponding larger number of independent directors representing the board.