INTERNAL AND EXTERNAL FACTORS OF DIVIDEND PAYOUT POLICY: EVIDENCE FROM MALAYSIAN CONSTRUCTION SECTOR
Keywords:
Malaysia, Dividend Pay-out Policy, Internal Factors, External Factors, Construction SectorAbstract
This study is set to identify the internal and external determinants of dividend policy of Malaysian listed
construction firms. In specific, this study (1) investigates which determinants strongly explain dividend
policy’s proxy and (2) identifies the relationship between firms’ internal and external determinants with
dividend policy’s proxy. This study’s specification model is developed using the Dividend Smoothing
Theory. Four firms’ internal factors (EPS, SIZE, lagDIV, FCFps) and one firms’ external factor (MBeta)
are investigated. Panel data regression analysis of Ordinary Pooled Least Squares, Fixed Effects Model
and Random Effects model are used to investigate the identified factors. The findings highlight that the
Fixed Effects Model is the most appropriate, with an explanatory power of 33.73%. Three firms’ internal
factors variables (EPS, lagDIV, and FCFps) are significant and positively affect firms’ dividend policy.
This study also investigates other empirically proven firm’s factors and found that they are not
significant. Furthermore, they worsened the model’s explanatory power. Thus, proving a unique
difference in dividend policy’s predictors of the different economic sectors.
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