LARGE SHAREHOLDERS AND DIVIDEND PAYOUT IN MALAYSIA

The dividend puzzle remains an interesting subject especially in emerging markets where agency problem is severe. This study examines the issues by assessing the large shareholders controlling interest in manager owned firms and corporation owned firms. A sample data of 762 Malaysian public listed firms covering the period from 2008 to 2014 are examined. The results show a statistically significant non-linear relationship between the largest shareholder (LO) and dividend payout for manager owned (MO) firms. MO firms reduce dividend distribution according to assets and revenue when the largest shareholder's controlling stake is low. However, at a higher level of controlling stake, MO firms increase dividend distribution, irrespective of firms share prices, assets and revenues. The study shows that corporation owned (CO) firms do not associate significantly with the dividend payout, but MO firms pursue different types of dividend distribution policies. Lastly, there is a need to improve the role of the second largest shareholder as a governance mechanism.