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Vol. 16, Number 2, 2021

 
DIVIDEND POLICY IN MALAYSIA: A COMPARISON OF DETERMINANTS PRE AND POST MALAYSIAN CODE ON CORPORATE GOVERNANCE
Mohd Ashari Bakri, Mohamad Isa Abd Jalil & Zakiah Hassan
Labuan Faculty of International Finance, Universiti Malaysia Sabah
Corresponding author: mohd.ashari@ums.edu.my 
 
 
Abstract | Text
 
This study was aimed at examining the differences between dividend policy determinants pre- and post-Malaysian Code on Corporate Governance (MCCG) 2012. Several factors, including profitability, lagged dividend, free cash flow, debt, firm size, investment opportunities and market risk were tested. The study investigated a total number of 631 non-financial firms in Malaysia that covered 7830 firm-year observations from 2005 to 2011 (pre-MCCG) and from 2013 to 2019 (post-MCCG). The study used pooled Ordinary Least Square (OLS) and random and fixed effect, with a robust standard error. The results demonstrated that from seven factors tested only four factors were found to be significant in determining dividend policy in pre-MCCG, and five factors in post MCCG. The pre-MCCG test revealed that before the revised MCCG 2012, the factors determining dividend policy were as follows: profitability, lagged dividend, debt, and firm size. However, there were slight changes in the range of determinants affecting dividend policy, Post-MCCG 2012. The post MCCG test revealed that profitability, lagged of dividend, and firm size consistently determined firm dividend policy; however, debt was no longer a significant determinant of dividend policy post MCCG. Additionally, investment opportunity and market risk were found to be significant determinants of dividend policy post-MCCG in 2012.
 
Keywords: Dividend policy, corporate governance, emerging markets, Malaysia.
 
JEL Classification: G1, G3, G35.
 

 
THE ROLE OF INCOME TAX SYSTEM STRUCTURE IN TAX NON-COMPLIANCE BEHAVIOUR AMONG SMEs IN YEMEN
1Lutfi Hassen Ali Al-Ttaffi, 2Hijattulah Abdul-Jabbar & 3Saeed Awadh Bin-Nashwan
1College of Administrative Science, Seiyun University, Yemen
2Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia
3Islamic Business School, Universiti Utara Malaysia
1Corresponding author: alttaffilutfi@yahoo.com
 
 
Abstract | Text
 
Tax is the main source of government revenue. However, a number of countries worldwide are increasingly besieged by challenges regarding compliance levels with the rules of tax systems. Thus, this paper aims to enhance an understanding of tax non-compliance behaviour by investigating the effect of the income tax system structure on Yemeni taxpayers’ behaviour. The study focuses on income tax compliance behaviour of owner-managers of small and medium enterprises (SMEs), as the Yemeni economy relies heavily on this sector. The SME sector represents 99.6 percent of business in Yemen. Based on a quantitative approach using a self-administered survey instrument, a total of 330 valid questionnaires were collected and the feedback provided analyzed. The results demonstrate that SME taxpayers exhibited a high level of tax non-compliance. Furthermore, the multiple regression analysis shows that the tax rate had a positive and significant influence on tax non-compliance behaviour, but the tax penalties rate did not. These results can be especially relevant to policymakers and practitioners of tax systems structures, particularly in a developing country such as Yemen.
 
Keywords: Tax non-compliance behaviour, tax system structure, SMEs, Yemen.
 
JEL Classification: M410.
 

 
BANKRUPTCY PREDICTION: SMES IN THE HOSPITALITY INDUSTRY
1Juraini Zainol Abidin, 2Nur Adiana Hiau Abdullah & 3Karren Lee-Hwei Khaw
1&2School of Economics, Finance and Banking, Universiti Utara Malaysia, Malaysia.
3Faculty of Business and Accountancy, University of Malaya, Malaysia. 
1Corresponding author: jurainizainolabidin@yahoo.com.my; 
 
 
Abstract | Text
 
The objectives of this study are to predict bankruptcy risk among SMEs in the hospitality industry for a three-year horizon period and to investigate the factors that are significant in determining bankruptcy. The contribution of SMEs in the hospitality industry is essential as businesses in the hospitality industry are dominated by SME operators. However, the failure rate among SMEs is relatively high and almost 50 percent of hospitality establishments do not survive beyond five years of operation. The Stepwise logistic model was employed to determine significant predictors that could predict bankruptcy for the period of one year, two years and three years before bankruptcy. Return on assets and firm age were found to be significant in all periods while other variables were identified to be important at a specific period prior to bankruptcy. In addition to return on assets and firm age, debt ratio and total assets turnover were found to be significant predictors of bankruptcy one-year prior to bankruptcy. However, in the two years prior to bankruptcy, debt ratio and total assets turnover were no longer important but current ratio, ownership concentration and gender diversity were found to be significant. As for the three years prior to bankruptcy, additional variables namely debt-to-equity ratio and board size were found to be significant, but ownership concentration and gender diversity ceased to be important. The findings of this study contribute to the limited literature in predicting the bankruptcy risk of small firms for a three-year horizon period by providing empirical evidence from SMEs in the hospitality industry of Malaysia.
 
Keywords: Bankruptcy, hospitality industry, logistic regression, prediction, SMEs.
 
JEL Classification:  G30, G33.
 

 
PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS
1Ahmad Harith Ashrofie Hanafi, 2Rohani Md-Rus & 3Kamarun Nisham Taufil Mohd
1Faculty of Business and Finance, Universiti Tunku Abdul Rahman, Malaysia
2&3 UUM College of Business, Universiti Utara Malaysia, Malaysia 
1Corresponding author: harith@utar.edu.my
 
 
Abstract | Text
 
Unstable economic conditions have an adverse impact on the financial performance of firms, leading to financial distress, which is an unfavourable situation for investors as it may affect their investment returns. Thus, this study attempted to predict financial distress and to examine the effect of financial distress on stock returns by using firms listed on Bursa Malaysia from 1990 to 2020. This study used the logit model to find the probability of bankruptcy and also as a proxy for financial distress risk in the asset pricing model. From this study, financial distress risk was found to be insignificant in pricing stock returns in all tested models. This finding demonstrates that financial distress risk does not affect stock returns since this risk may be eliminated through diversification.
 
Keywords: Predicting financial distress, financial distress risk, stock returns.
 
JEL Classification: G12, G17, G33.
 

 
COVID-19 AND STOCK RETURNS: EVIDENCE FROM MALAYSIA 
1Saw Imm Song, 2Erimalida Yazi, 3Fareiny Morni & 4Jennifer Tunga Janang
1Universiti Teknologi MARA, Cawangan Pulau Pinang
2, 3 & 4Universiti Teknologi MARA, Cawangan Sarawak 
1Corresponding author:songsi@uitm.edu.my    
 
 
Abstract | Text
 
The severe acute respiratory syndrome (SARS) coronavirus or Covid-19 has affected the world unprecedentedly. Malaysia is not exempted from its impact. The Malaysian government announced a nationwide lockdown in the middle of March 2020. The magnitude of the outbreak had caused panic to the public and financial panic in the stock market. This study examined the impact of Covid-19 cases and the action taken by the government through movement control orders (MCOs) and economic stimulus packages in the stock market. Event study methodology was used to assess the impact of Covid-19 on stock returns in Bursa Malaysia. Consistent with the efficient market hypothesis, the study found that during the early stages of the MCOs, the cumulative average abnormal returns (CAAR) reflected significant negative returns. However, it showed positive returns after MCO 3 and MCO 4. The results implied that the market perceived that the pandemic was under control. The study also revealed a significant relationship between CAAR and the number of cases announced, supporting the notion that in a less to a moderately free country such as Malaysia, investors showed a certain lack of trust in the number of cases reported by the authorities, and thus overreacted to the number of reported cases. The stimulus packages that were expected to stabilise the economy and society were found to be positively significant during the early stages of the MCOs. 
 
Keywords: Covid-19, pandemic, Malaysia, event study, efficient market hypothesis.
 
JEL Classification: G010, G140
 

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