Board performance and its relation to dividend payout: evidence from Malaysia
International Journal of Managerial Finance
ISSN: 1743-9132
Article publication date: 13 May 2021
Issue publication date: 8 March 2022
Abstract
Purpose
To examine the board of directors’ performance and if higher performance helps protect minority shareholders in an emerging capital market. Additionally, we determine if the different types of company ownership moderate the level of protection to minority shareholders.
Design/methodology/approach
The study develops a measure of board performance with their compensation. And it tests its association with the dividend payout decision of 300 of the largest Malaysian public listed companies (referred to as PLCs) over the period 2008 to 2014.
Findings
The results find that higher board productivity in terms of return on capital employed is associated with higher dividend payout. Additionally, the study finds that the board performance measure interacts with race, ethnicity and gender of the board of directors and CEO duality to affect the dividend payout decision of Malaysian PLCs.
Research limitations/implications
It is a single-country study of large Malaysian PLCs. And it uses only the governance mechanisms that have been shown in emerging capital markets to have the most significant effect on affecting the relationship between board performance and dividend payout.
Practical implications
The findings show the importance of inclusivity and diversity in governing State-controlled firms in an emerging capital market.
Originality/value
The findings suggest improving corporate boards’ performance, protecting minority shareholders and contributing to the corporate governance literature. Notably, the study highlights boardroom diversity’s importance to enhance the boards of State-controlled firms’ performance.
Keywords
Acknowledgements
This project is funded by the MOHE FRGS grant scheme (FRGS no: RGS/1/2014/SS05/MUSM/03/1).
Citation
Subramaniam, R. and Sakthi, M. (2022), "Board performance and its relation to dividend payout: evidence from Malaysia", International Journal of Managerial Finance, Vol. 18 No. 2, pp. 286-316. https://doi.org/10.1108/IJMF-08-2020-0409
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited