Effects of dividend tax reform on dividend behavior : a clientele theory approach

Clientele theory claims that investors have their own systematic preference to plan their dividend portfolios based on tax and transaction cost incurred. Due to that, companies need to decide on their dividend payout policy that can attract investors to invest in their company especially when di...

Full description

Saved in:
Bibliographic Details
Main Authors: Ida Suriya Ismail, Mohd Rizal Palil, Rosiati Ramli, Mara Ridhuan Che Abdul Rahman
Format: Article
Language:English
Published: Penerbit Universiti Kebangsaan Malaysia 2018
Online Access:http://journalarticle.ukm.my/20490/1/30082-102239-1-PB.pdf
http://journalarticle.ukm.my/20490/
https://ejournal.ukm.my/pengurusan/issue/view/1154
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Universiti Kebangsaan Malaysia
Language: English
id my-ukm.journal.20490
record_format eprints
spelling my-ukm.journal.204902022-11-11T09:06:32Z http://journalarticle.ukm.my/20490/ Effects of dividend tax reform on dividend behavior : a clientele theory approach Ida Suriya Ismail, Mohd Rizal Palil, Rosiati Ramli, Mara Ridhuan Che Abdul Rahman, Clientele theory claims that investors have their own systematic preference to plan their dividend portfolios based on tax and transaction cost incurred. Due to that, companies need to decide on their dividend payout policy that can attract investors to invest in their company especially when dividend tax laws change from full imputation system to single tier tax system (STT). STT is expected to enhance the simplicity and efficiency of the tax administration process with the intention of encouraging companies to pay dividend. Therefore, this paper attempts to examine company dividend payouts by focusing on two observations periods; during transitional period of STT and after the compulsory effects of STT. This study has selected 141 public listed companies from two of the biggest industries in Malaysia and produced 4,508 observations for the period of 2002 until 2015. This study has used t-test of significant difference to test the changes on dividend payouts by splitting the data into full sample and among the payers only. Initially, during the transitional period, results were consistent with clientele theory when it was found that both regular and special dividend had significantly increased during transitional period. In addition, this study also found that companies with the best performance in terms of return on equity had significantly increased their regular dividend, while moderate companies has significantly increased special dividend during transitional period. But the results were insignificant among poor performance companies. In contrast, the results suggested that there is no significant difference of dividend payouts once the compulsory effects of STT took place. Penerbit Universiti Kebangsaan Malaysia 2018 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/20490/1/30082-102239-1-PB.pdf Ida Suriya Ismail, and Mohd Rizal Palil, and Rosiati Ramli, and Mara Ridhuan Che Abdul Rahman, (2018) Effects of dividend tax reform on dividend behavior : a clientele theory approach. Jurnal Pengurusan, 54 . pp. 165-179. ISSN 0127-2713 https://ejournal.ukm.my/pengurusan/issue/view/1154
institution Universiti Kebangsaan Malaysia
building 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 Clientele theory claims that investors have their own systematic preference to plan their dividend portfolios based on tax and transaction cost incurred. Due to that, companies need to decide on their dividend payout policy that can attract investors to invest in their company especially when dividend tax laws change from full imputation system to single tier tax system (STT). STT is expected to enhance the simplicity and efficiency of the tax administration process with the intention of encouraging companies to pay dividend. Therefore, this paper attempts to examine company dividend payouts by focusing on two observations periods; during transitional period of STT and after the compulsory effects of STT. This study has selected 141 public listed companies from two of the biggest industries in Malaysia and produced 4,508 observations for the period of 2002 until 2015. This study has used t-test of significant difference to test the changes on dividend payouts by splitting the data into full sample and among the payers only. Initially, during the transitional period, results were consistent with clientele theory when it was found that both regular and special dividend had significantly increased during transitional period. In addition, this study also found that companies with the best performance in terms of return on equity had significantly increased their regular dividend, while moderate companies has significantly increased special dividend during transitional period. But the results were insignificant among poor performance companies. In contrast, the results suggested that there is no significant difference of dividend payouts once the compulsory effects of STT took place.
format Article
author Ida Suriya Ismail,
Mohd Rizal Palil,
Rosiati Ramli,
Mara Ridhuan Che Abdul Rahman,
spellingShingle Ida Suriya Ismail,
Mohd Rizal Palil,
Rosiati Ramli,
Mara Ridhuan Che Abdul Rahman,
Effects of dividend tax reform on dividend behavior : a clientele theory approach
author_facet Ida Suriya Ismail,
Mohd Rizal Palil,
Rosiati Ramli,
Mara Ridhuan Che Abdul Rahman,
author_sort Ida Suriya Ismail,
title Effects of dividend tax reform on dividend behavior : a clientele theory approach
title_short Effects of dividend tax reform on dividend behavior : a clientele theory approach
title_full Effects of dividend tax reform on dividend behavior : a clientele theory approach
title_fullStr Effects of dividend tax reform on dividend behavior : a clientele theory approach
title_full_unstemmed Effects of dividend tax reform on dividend behavior : a clientele theory approach
title_sort effects of dividend tax reform on dividend behavior : a clientele theory approach
publisher Penerbit Universiti Kebangsaan Malaysia
publishDate 2018
url http://journalarticle.ukm.my/20490/1/30082-102239-1-PB.pdf
http://journalarticle.ukm.my/20490/
https://ejournal.ukm.my/pengurusan/issue/view/1154
_version_ 1751537469092790272