Title: The effect of statutory reserve requirement on conventional banks' dividend decision in Malaysia

Authors: Mei Foong Wong

Addresses: Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University College, Jalan Genting Kelang, 53300 Kuala Lumpur, Malaysia

Abstract: Dividend policy persists as one of the most important unsolved issues in finance involving in the banking industry. Hence, this study investigates the effect of statutory reserve requirement and bank-specific factors on bank dividend payout decision. Based on all listed conventional banks from Malaysia for the period 2001-2018, the dividend decision model is predicted by applying the panel cointegration test, fully modified ordinary least squares, dynamic ordinary least squares and panel Granger causality test. The findings offer evidence of the positive impact of reserve funds and liquidity on conventional banks' dividend decision. The results also indicate that non-performing loan and leverage have significant and negative impact on bank dividend decision. Further analyses show that there is a long-run causality association running from reserve funds and bank-specific factors to dividend decision. Hence, policymakers should strive to formulate appropriate policies to mitigate the possibility undermining impacts on a nation's growth.

Keywords: bank-specific factors; dividend; leverage; non-performing loan; reserve funds; Malaysia.

DOI: 10.1504/IJEPEE.2023.136307

International Journal of Economic Policy in Emerging Economies, 2023 Vol.18 No.3/4, pp.247 - 255

Received: 25 Oct 2020
Accepted: 09 Mar 2021
Published online: 30 Jan 2024 *

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