Product market competition, regulation and dividend payout policy of Malaysian banks

Abstract

Purpose This paper aims to investigate the impact of the product market competition, regulations on the dividend policies of the listed banks, over the period 1995‐2005 in Malaysia. Design/methodology/approach An ordered probit modelling technique and target adjustment model is used. Findings Significant differences are found in the payout of the banks categorized as selling non‐interest based banking products and mix of both interest and non‐interest based banking products. It is found that the decision to increase dividends is significantly related to earnings, and the decision to cut dividend is significantly related to the changes in the non‐performing loans, corporate and real estate sectors loans ratio and earnings losses. Research limitations/implications The research findings have implications for the regulators of banks. Originality/value The research provides a clear link between banks' portfolio choice and earnings that have implications for dividends in emerging markets.

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