Board performance and its relation to dividend payout: evidence from Malaysia

Ravichandran Subramaniam and Mahenthiran Sakthi

International Journal of Managerial Finance, 2021, vol. 18, issue 2, 286-316

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: Corporate governance; Dividend payout; Board performance; Board composition; G35; J33; N25 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-08-2020-0409

DOI: 10.1108/IJMF-08-2020-0409

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