Single tier tax system, dividend payouts and family firms: Evidence from Malaysia

• Published in: International Journal of Business and Management Science
• Main Author: Ismail I.S.; Palil M.R.; Ramli R.; Rahman M.R.C.A.; Osman L.H.
• Format: Article
• Language: English
• Published: Society for Alliance, Fidelity and Advancement (SAFA) 2018
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85061979533&partnerID=40&md5=005a97e3899246a619c7f524d94798f3

This study has two objectives. First, it compares the dividend payouts of family firms and non-family firms for two specific periods, before and after the implementation of a single tier tax system (STT) in Malaysia. Second, it examines the relationship between family firms and dividend payouts. Using 483 firm-year observations, this study suggests that family firms pay lower dividends than non-family firms during both periods. In addition, the mean value of dividends paid by family firms decreased after the implementation of STT. It is also evident that a negative relationship exists between family firms and dividend payouts; family firms are less likely to pay dividends that non-family firms. A few unique characteristics of family firms, such as long-term investment orientations, smaller company size and greater dependence on leverage, may result in family firms retaining their cash rather than declaring dividends. Copyright @ 2017, Mohammad Safa.