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Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect

One of a firm’s major financial decisions that lies in the hands of the board of directors is dividend policy which has long been linked to the firm’s profitability and performance. From the shareholders’ viewpoint, profitability does not necessarily add value to their wealth unless and until it t...

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Main Authors: Norazlan Alias,, Mohd. Hasimi Yaacob,, Ruzita Abdul Rahim,, Fauzias Mat Nor,
Format: Article
Language:English
Published: School of Social, Development and Environmental Studies, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia 2016
Online Access:http://journalarticle.ukm.my/9813/1/6x.geografia-si-feb16-norazlan-edam.pdf
http://journalarticle.ukm.my/9813/
http://www.ukm.my/geografia/v2/index.php?cont=a&item=2&thn=2016&vol=12&issue=2&ver=loc
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spelling my-ukm.journal.98132016-12-14T06:50:55Z http://journalarticle.ukm.my/9813/ Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect Norazlan Alias, Mohd. Hasimi Yaacob, Ruzita Abdul Rahim, Fauzias Mat Nor, One of a firm’s major financial decisions that lies in the hands of the board of directors is dividend policy which has long been linked to the firm’s profitability and performance. From the shareholders’ viewpoint, profitability does not necessarily add value to their wealth unless and until it translates into dividend payment and price appreciation.Therefore, how corporate governance via board structure influences the use of free cash flow and how this interaction affects dividend payment are crucial. This study examined the interaction effects of firm’s characteristics such as board structure and free cash flow on divided per share as a proxy of firm’s performance. The fixed effect regression with a sample of 361 non-financial Malaysian listed firms over the period of 2002 to 2007 were employed in the analysis. The interaction between board structure, independent directors , board size and free cash flow revealed that duality weakens the positive effect of free cash flow on dividend, while independent directors strengthen the positive effect of free cash flow on dividend payment. Overall, the results of this study may be surmised to suggest that large number of independent directors in the board of directors benefits the firms in the use of free cash flow, leading to an increase in distributable income to shareholders; but the existence of duality role does not benefit firms in the use of free cash flow, leading to a decrease in distributable income to shareholders. However, board size does not have an effect on the use of free cash flow and performance. School of Social, Development and Environmental Studies, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia 2016-02 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/9813/1/6x.geografia-si-feb16-norazlan-edam.pdf Norazlan Alias, and Mohd. Hasimi Yaacob, and Ruzita Abdul Rahim, and Fauzias Mat Nor, (2016) Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect. Geografia : Malaysian Journal of Society and Space, 12 (2). pp. 58-67. ISSN 2180-2491 http://www.ukm.my/geografia/v2/index.php?cont=a&item=2&thn=2016&vol=12&issue=2&ver=loc
institution Universiti Kebangsaan Malaysia
building Perpustakaan Tun Sri Lanang Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Kebangsaan Malaysia
content_source UKM Journal Article Repository
url_provider http://journalarticle.ukm.my/
language English
description One of a firm’s major financial decisions that lies in the hands of the board of directors is dividend policy which has long been linked to the firm’s profitability and performance. From the shareholders’ viewpoint, profitability does not necessarily add value to their wealth unless and until it translates into dividend payment and price appreciation.Therefore, how corporate governance via board structure influences the use of free cash flow and how this interaction affects dividend payment are crucial. This study examined the interaction effects of firm’s characteristics such as board structure and free cash flow on divided per share as a proxy of firm’s performance. The fixed effect regression with a sample of 361 non-financial Malaysian listed firms over the period of 2002 to 2007 were employed in the analysis. The interaction between board structure, independent directors , board size and free cash flow revealed that duality weakens the positive effect of free cash flow on dividend, while independent directors strengthen the positive effect of free cash flow on dividend payment. Overall, the results of this study may be surmised to suggest that large number of independent directors in the board of directors benefits the firms in the use of free cash flow, leading to an increase in distributable income to shareholders; but the existence of duality role does not benefit firms in the use of free cash flow, leading to a decrease in distributable income to shareholders. However, board size does not have an effect on the use of free cash flow and performance.
format Article
author Norazlan Alias,
Mohd. Hasimi Yaacob,
Ruzita Abdul Rahim,
Fauzias Mat Nor,
spellingShingle Norazlan Alias,
Mohd. Hasimi Yaacob,
Ruzita Abdul Rahim,
Fauzias Mat Nor,
Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect
author_facet Norazlan Alias,
Mohd. Hasimi Yaacob,
Ruzita Abdul Rahim,
Fauzias Mat Nor,
author_sort Norazlan Alias,
title Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect
title_short Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect
title_full Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect
title_fullStr Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect
title_full_unstemmed Board structure, free cash flow and dividend per share in Malaysia listed firms: an empirical study of interaction effect
title_sort board structure, free cash flow and dividend per share in malaysia listed firms: an empirical study of interaction effect
publisher School of Social, Development and Environmental Studies, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia
publishDate 2016
url http://journalarticle.ukm.my/9813/1/6x.geografia-si-feb16-norazlan-edam.pdf
http://journalarticle.ukm.my/9813/
http://www.ukm.my/geografia/v2/index.php?cont=a&item=2&thn=2016&vol=12&issue=2&ver=loc
_version_ 1643737913926615040
score 13.211869

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