Corporate diversification and dividend policy: empirical evidence from Malaysia

The study examined the impact of corporate diversification on dividend policy. It locates the investigation in Malaysia, using 712 firms listed on the main market of Bursa Malaysia for a 5-year period from 2010 to 2014. The results show that industrially diversified firms pay low dividends as the firms could not leverage economies of scope by diversifying into different industries. The firms’ motive to conduct industrial diversification activities may not be related to the enhancement of firm performance and shareholders’ wealth. In contrast, geographical diversification positively influences dividend policy and this relationship is in relation to the resource-based view hypothesis that discusses the efficient use of resources through the internal capital market. This study contributes towards our understanding of the impact of the different nature of diversification on firm-level dividend policies.