Growth opportunities and dividend payouts of family controlled firms: evidence from Malaysia / Neshaleni S. Paramanantham

Faculty of Industrial Management

Thesis (Master of Science) -- Universiti Malaysia Pahang – 2019

Includes bibliographical references

This thesis is designed to achieve three objectives. The first objective is to examine potential differences between family controlled firm and non-family in terms of their dividend payouts since prior studies which was tested on family controlled firm and non-family were only focused on their performance. While the second objective is to explore the effects of family controlled firm on dividend payouts, in view past studies which were tested on family controlled firm towards dividend payout have showed various outcomes on dividend payout across many countries. Finally the third objectives to improve the literatures by demonstrating the moderating effect of growth opportunities in the relationship of family controlled firm and dividend payout due to moderating effect of growth opportunities was not tested directly on the relationship between family controlled firms towards dividend payout in many empirical studies conducted before. Financial data on the top 200 publicly listed firms in Malaysia were collected from the Thomson One database for the period from 2011 to 2016. Family controlled firm was identified based on the top 30 largest shareholders list available in the annual reports of the sample firms. This thesis measures dividend payout as the ratio of dividends paid to profit while the growth opportunities as changes in total assets. In order to test the first hypothesis, the test of differences was conducted to examine whether family controlled firms pay dividends differently from non-family controlled firms. The findings indicate non-family controlled firms are paying a significantly higher percentage of dividend out of their profits compared to family controlled firms. Besides that, Regression models were used to investigate the relationship among the variables as to test the second and third hypothesis. The findings show significantly negative relationship between family controlled firm and dividend payouts. Moreover, family controlled firms with moderator of growth opportunities also pay fewer dividends out of their profits. These findings are robust to the uses of different measurement for dividend payouts, family controlled firms and estimation methods. Overall, the results support the Type II agency problem that controlling shareholders can make decisions at the expense of minority shareholders, where in this case the controlling shareholders are the family owners. The findings of this study provide insights for policymakers in identifying the factors to consider regarding dividend policy in family controlled firms, particularly those with the presence of growth opportunities. Therefore policy makers in common-law countries such as Malaysia can set up certain dividend payout policies to protect minority shareholders.