THE OIL PRICE SLIDE AND DIVIDEND PAYOUT RATIO: AN ASSESSMENT FROM PUBLIC LISTED PLANTATION COMPANIES

Abstract

The slide in global oil price issue can affects various sectors including plantation sector. Since the plantation companies have to survive with the objective of maximizing the wealth of the shareholder and therefore dividend decision is really crucial. Hence, this study tries to assess the price of oil effect on dividend payout ratio of public listed plantation companies in Malaysia. Using a panel data spanning from 2007 to 2016, 14 public listed plantation companies are chosen for analysis. A panel static method of Random Effect Model is applied. Finding reveals the oil price has the expected magnitude but unfortunately is insignificant in influencing dividend payout ratio. Nonetheless, other variables chosen as controlling variables such as return on asset, debt to equity and current ratio are significant at 1% and 10% significance level. In conclusion, the price of oil does not affect directly on the dividend payout ratio of public listed plantation companies. Therefore, it explains the phenomenon of despite the continuous slide in oil price, most of the plantation companies in Malaysia persistently cutting the dividend.