THE IMPACT OF FINANCING DECISION, DIVIDEND POLICY, AND CORPORATE OWNERSHIP ON FIRM PERFORMANCE AT PRESENCE OR ABSENCE OF GROWTH OPPORTUNITY: A PANEL DATA APPROACH, EVIDENCE FROM KUALA LUMPUR STOCK EXCHANGE

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Abstract

The aim of this paper is to analyze the impact of a company’s level of financing policy, dividend policy and corporate structure on firm performance measured by Tobin Q of Malaysian-listed at the presence or absence of growth opportunities. The study uses panel based regression approach to address whether or not policy variable such as dividend, leverage and corporate structure play differently in explaining the market based firm performance once firm faces growth opportunities or absence of growth opportunities. The analysis is based on a sample of 100 Composite Index components Companies on Kuala Lumpur stock exchange over a period of 4 years, from 1999 to 2002. Findings suggest that firm debt policy affect firm performance differently once firm face presence or absence of growth opportunities. The relationships are unique for each scenario. Once the firm faces no growth opportunities, increase in corporate debt has adverse effect on firm performance. In contrast, firms, which face growth opportunities, resorting external funding provide a multiplier effect on firm performance. While corporate dividend policy seems to be indifferent for the firms which face growth or no growth opportunities, but provide a greater explanation for the potential impact on firm performance implying that dividend policy remain most stable in Malaysian capital market which is valued by corporate investors. Corporate structure proxies by managerial ownership may not provide any meaningful explanation for firm performance over the analysis period. However, firms based both on domestic and multinational ownership provides strong explanation for firm performance once firms face no growth opportunity. Hence this study provides new lights on issue of corporate structure on firm’s performance.

Keywords: Dividend And Leverage Policy, Corporate Ownership Structure, Firm Value, Panel Based Regression

How to cite this paper: Ali Ahmed, H. J. (2008). The impact of financing decision, dividend policy, and corporate ownership on firm performance at presence or absence of growth opportunity: A panel data approach, evidence from Kuala Lumpur stock exchange. Corporate Ownership & Control, 6(1-4), 485-491. https://doi.org/10.22495/cocv6i1c4p8