1.

0 Introduction Large shareholders, who hold sizeable fraction of all voting shares in a listed company, may solve the fundamental problem of modern capital markets: the difficulty outside claims holders have in monitoring corporate management. For individual shareholder, the cost to obtain more information can be a great benefit. In addition, the ownership of individual shareholders are spread too small to affect the result, even if the benefits are great enough to provide sufficient incentives for the information. Large shareholders have potentially to overcome both these problem. They can reap large benefits for themselves and other shareholders with the information and possibly to influence the results of the voting bloc because they hold the power of the organization (Zeckhauser & Pound, 1990). The effective control of the large shareholders enables the shareholders to influence the decisions regarding how companies are run and also decisions on corporate policies (Ramli, 2010). However, as stated by Holderness (2003), the role of large shareholders is not well developed in the ownership literature, especially the role of the largest shareholder. Holdemess (2003) stated that the large shareholders have the incentive to improve management, but they also have an incentive to take the companys resources. The largest shareholder is a unique group of shareholder, as their holding can be associated with benefits and costs, especially the underinvestment costs. Large shareholders thus address the agency problem in that have both a general interest in profit maximization and enough control over the assets of the company to have their interest respected (Claessens, Djankov, Fan, & Lang, 2002).

Dividend policy is a policy used by company to decide how much to pay to shareholders in dividends. Capital markets punish dividend cuts with large stock price reductions is consistent with the agency costs of free cash flow (Jensen, 1986). Dividend plays a role in the limiting insider expropriation because they eliminate the corporate wealth of insider control (Faccio, Lang, & Young, 2000). In view of this argument, it is examine the relationship between large shareholders, especially the largest understanding of the companys dividend results. The main focus of this study is to investigate the effect of the largest shareholder on the corporate dividend policy by examining Malaysian listed companies in 2009. Malaysia provides an interesting background to examine this issue as the ownership structure is concentrated and large shareholders are in control. This study consists of non-financial public listed companies (PLCs) of Bursa Malaysia (Malaysian Stock Exchange), which consistently listed over the period of 2009. We are use a sample of 100 Malaysian listed companies in this study. Financial, trusts and closed-end funds companies are excluded, as they are subjected to a regulatory framework that does not apply to other listed companies. This study is also applies a systematic random sampling of 859 for the population. Data on the ownership of the sample companies are hand-collected from the annual reports, which are downloaded from the website of Bursa Malaysia

(http://www.klse.com.my). The process of collecting the ownership data is by examining the analysis of shareholdings section discloses in the annual reports. Two categories of large shareholders are the focus of this study, namely the largest shareholder and the second largest shareholder. The largest shareholder is defined as

a shareholder who own directly and indirectly the total equity of the company. The second largest shareholder is defined as the next largest shareholder who is not affiliated with the largest shareholder. We scrutinize thoroughly each of the companys annual reports to collect the relevant information. Extra care is taken in identifying the indirect holding of the largest shareholder.

2.0 Literature review Agency theory states that large shareholders ownership may either alleviate or exacerbate agency problems. A high level of managerial ownership could reduce the agency problems, as managers have to bear some the losses arising from their different behavior (Jensen & Meckling, 1976). Large shareholders have a strong incentive to maximize the wealth of the companys, having control of the company to have their interest respected (Shleifer & Vishny, 1997) and has the advantage in collecting information and monitoring of the company (Shleifer & Vishny, 1986). Difference interests between large shareholders and minority shareholders, leading to possible expropriation by large shareholders (Shleifer & Vishny, 1997). Agency theory also mentions that dividends can be used as a corporate governance (CG) mechanism to mitigate agency concerns. Jensen (1986) suggests that high dividends payment could reduce the cash available to managers. Therefore, the investment manager of the project is not economically or minimizes wastage of perquisites. The relationship between the managerial ownership and dividend policy has been extensively examined in empirical studies (Agrawal & Jayraman, 1994).

Studies reveal that companies pay lower dividends when the managerial shareholding in companies is relatively high. Dividends also have a role in controlling agency conflicts between large shareholders and minority shareholders. By paying dividends, distribution can be guaranteed to all shareholders and limit corporate wealth from large shareholders control Dividends can also be utilized by controlling shareholders to off-set the minority shareholders concern in an environment where expropriation by controlling shareholders prevails (Faccio, Lang, & Young, 2000). However, in the presence of large shareholders, lower dividend payments can be observed as dividends are not needed to function as an alternative agency control device (Goergen, Renneboog, & Silva, 2005). Dividends are viewed as a substitute mechanism to large shareholder ownership in mitigating agency conflicts. Recent studies have analyses the effect of other large shareholders, other than the largest shareholder on companies based from agency perspectives. Empirical evidence on the impact of other large shareholders on dividend policy has been limited. Faccio et al. (2001) prove that the presence of multiple large shareholders in Europe minimizes the expropriation activity of the controlling shareholder, thus resulting in higher dividend payments, while in Asia; lower dividend rates are being observed. They conclude that the controlling shareholder collaborate with other large shareholders to expropriate the minority shareholders in Asia. Several single country studies that analyses the effect of other large shareholders, particularly the second largest shareholder on dividend policy yield mixed results. For Finland, Maury and Pajuste (2002) show that dividend payouts are negatively related to the second largest

shareholder. It is also find a positive relationship between the second largest shareholder and dividend payouts in Germany. The hypothesis for this study is as follows: Hypothesis 1: Association of Malaysia in a negative dividend related to the ownership of the largest shareholders. Hypothesis 2: Association of Malaysia in positive dividend related to the ownership of second largest shareholder.

3.0 Methodology 3.1 Research and methodology The objective of this paper is to investigate whether the largest shareholders influence firms dividend payout. The report is consists of non-financial public listed companies (PLCs) of Bursa Malaysia (Malaysian Stock Exchange). The report applied a systematic random sampling of one for every two companies in the population. There have the final sample contains 100 companies. Alternatively, we could analyze the time-series variation in ownership structure and evaluate the impact of the ownership structure on dividend policy. 3.2 Sources and Collection of Data The data on the ownership of the sample companies are hand-collected from the annual report, which are downloading from the website of Bursa Malaysia (http://www.klse.com.my). The process of collecting the ownership data is by

examining the analysis of shareholdings section discloses in the annual reports. Two categories of large shareholders to report the focus will be are selected. There have two categories of research that will be the largest category of shareholders and the second largest shareholder. The research will be conducted based on the company's financial statements will be chosen at random. The company randomly is selected from the companies listed on Bursa Malaysia. The largest shareholder is defined as shareholders who have directly or indirectly a total equity of the company. The second largest shareholder is defined as the next biggest shareholder is not associated with the largest shareholder. Thoroughly research each company's annual report to collect relevant information. The extra care is taken in identifying the indirect acquisition of the largest shareholders. However, the size of the stock holdings is only a crude proxy for the influence power of the particular shareholder. So therefore only to select that the relative rather than the influence power of given shareholder that determine to influence the firms policy. 3.3 Model Specifications The model we use to investigate the relationship between the large shareholders on the level of the dividend payouts. The methodology that used the randomeffects to bit regressions to analyzed the influence of large shareholders on the level of dividend payouts. The details of the dependent and independent variables use are explained in Table 1. The dependent variable in this report is the amount of cash dividends paid. In Mancinelli and Ozkan (2006), the cash dividends are expressed in two ratios, namely cash dividends/earnings and cash

dividends/market capitalization. Among the independent variables, the most important one is the ownership variable. Mancinelli and Ozkan (2006) use one variable for the voting rights of the largest shareholder, and another variable for the voting rights of all shareholders that have more than 2 percent of the voting rights, excluding the largest shareholder. Table 1: Summary of the dependent and independent variables DEPENDANT VARIABLE Dividend payout ratio (DIVE) INDEPENDENT VARIABLES LARGE SHAREHOLDERS LARGEST The proportional holding of the largest shareholder. SECOND The proportional holding of the second largest shareholder. CONTROL VARIABLES ROA The ratio of earnings before interest and taxes to total assets The ratio of the book value of total debt to total assets Dividends/earnings ratio, where earnings are measured after taxes and interest but before extraordinary items.

DEBT RATIO

Dividend payout ratio is basically the ratio between the amount of dividends that are paid and the net income for that accounting and financial year. This ratio is expressed in the form of a percentage. Through the percent amount also exceeds

100%, in some cases, due to the fact that companies are sometimes also authorized to issue dividends that exceed the face value of shares. The calculation dividend payout ratio formula is of the sample ownership a company is:

ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". The calculation return on assets (ROA) formula is:

About the size of their shareholders, for this report is chosen that the formula is following the debt ratio formula. The calculation debt ratio formula is:

For the largest shareholders, we analyze percentage the shareholdings at 100 the sample selected company to given better the results. The calculation percentage the largest shareholder and the second largest shareholder following the analysis of Shareholdings are:

4.0 Data and analysis 4.1 Descriptive Statistic The table below is showing that a list of randomly selected companies in the finding the percentage of the largest shareholder at the random company. No of Company name Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Ariantec Global Berhad Cwork Systems Berhad Emivest Berhad Green Packet Berhad Guan Chong Berhad Haisan Resources Berhad Harvest Court Industries Berhad Kbes Berhad Leweko Resources Berhad MBF Holding Berhad MMS Ventures Berhad Muhibah Engineering (M) Berhad Nagamas International Berhad Ornapaper Berhad Petra Energy Berhad Protasco Berhad shareholder (%) 46.93 43.83 59.72 62.92 53.64 38.38 41.98 51.62 42.17 67.62 39.69 63.437 61.05 57.13 46.22 54.99 shareholder (%) 35.14 28.79 28.11 24.66 32.20 32.23 35.88 26.46 34.89 20.18 26.68 23.164 28.48 20.84 39.92 23.42 The largest The second largest

17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

Sarawak Consolidated Industries Berhad Sealink International Berhad Sunway Holding Berhad Tanco Holding Berhad Thong Guan Industries Berhad VOIR Holding Berhad Three-A Resources Berhad A&M Realty Berhad AIKBEE Resources Berhad Airport Malaysia Holding Berhad Supermax Corporation Berhad Symphony House Berhad Swee Joo Berhad Sunway City Berhad Tasco Berhad ARK Resources Berhad Advance Synergy Berhad Baneng Holding Berhad BCT- Technology Berhad HDM- Carlaw Corporation Berhad CME Group Berhad Coastal Contracts Berhad Ducth Lady Milk Industries Berhad

65.35 41.44 52.64 54.09 55.25 51.17 54.35 79.84 52.064 58.19 49.245 35.08 55.27 50.79 60.23 47.58 51.97 43.94 45.47 43.49 51.28 50.38 48.78

14.64 26.98 29.27 18.34 26.62 37.73 24.42 13.30 33.198 37.09 28.78 28.97 30.06 37.24 21.20 40.40 32.95 29.18 34.35 33.83 18.38 27.48 43.82

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62

Dufu Technology Corp.Berhad EMICO Holding Berhad Envair Holding Berhad Equator Life Science Berhad Favelle Farco Berhad Federal Furniture Holding (M) Bhd H-Displays (MSC) Berhad Hock Lok Siew Corporation Berhad Ho Hup Contruction Company Berhad Intelligent Edge Technology Berhad Kamdar Group (M0 Berhad KUB Malaysia Berhad LBS Bina Group Berhad LCL Corporation Berhad Lee Swee Kiat Group Berhad Limahsoon Berhad Luster Industries Bhd Securities Services (Holdings) Berhad Maxtral Indusrty Berhad Mechmar Global Berhad Menang Corporation (M) Berhad Metronic Global Berhad Minetech Resources Berhad

54.20 53.63 37.64 44.68 55.612 44.94 45.49 39.47 62.32 43.02 74.73 46.05 42.505 50.59 38.835 49.25 43.56 57.71 72.58 60.10 53.73 51.342 36.33

36.21 18.85 36.93 31.53 26.655 42.10 25.97 29.41 17.32 36.87 15.97 37.09 31.083 35.84 34.296 26.67 31.96 19.30 16.64 26.49 37.11 24.617 31.98

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85

MINHO (M) Berhad Mitrajaya Holdings Berhad MLABS Systems Berhad Muda Holdings Berhad Malayan United Industries Berhad MUI Properties Berhad Oilcorp Berhad Oriental Holding Berhad Paragon Union Berhad Perwaja Holding Berhad POS Malaysia Berhad Putrajaya Perdana Berhad Puncak Niaga Holding Berhad PW Consolidated Berhad Rimbunan Sawit Berhad Scomi Group Berhad Scomi Engineering Berhad Scomi Marine Berhad Seacera Tiles Berhad Sinotop Holding Berhad Silver Ridge Holdings Bhd Superlon Holding Berhad Sycal Ventures Berhad

54.60 64.98 46.25 68.88 48.50 59.80 48.80 51.45 57.71 54.80 37.51 49.33 63.59 64.45 63.86 55.83 53.20 61.64 63.44 55.10 41.52 67.77 50.84

33.46 17.82 28.28 15.54 22.07 21.90 24.43 23.18 26.73 26.99 34.24 32.39 19.45 15.72 20.04 29.77 33.00 21.90 13.97 34.13 39.45 21.49 34.59

86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

SYF Resources Berhad TAFI Industries Berhad TPC Plus Berhad Tracoma Holdings Berhad Tradewinds Corporation Berhad Unisem (M) Berhad Vastalux Energy Berhad Viztel Solutions Berhad Wang-Zheng Berhad Warisan TC Holdings Berhad Wonderful Wire & Cable Berhad WZ Steel Berhad Xian Leng Holding Berhad YNH Property Bhd KFC Holding (Malaysia) Berhad

45.18 59.720 43.16 45.14 47.97 62.53 33.95 50.94 36.92 51.73 69.65 46.39 51.40 49.11 48.72

34.57 27.709 34.24 41.40 35.99 17.24 33.46 25.79 37.11 33.25 14.56 31.50 29.05 25.56 31.40

The table below is an analysis of ROA, dividend and debt ratio. No.of company 1 Dividend Payout Ratio ROA - 0.17 Debt Ratio 0.0016

Company Name Ariantec Global Berhad Cwork Systems Berhad Emivest Berhad Green Packet Berhad Guan Chong Berhad Hai San Resources Berhad Harvest Court Industries Berhad Kbes Berhad Leweko Resources Berhad MBF Holding Berhad MMS Ventures Berhad Muhibah Engineering (M) Berhad Nagamas International Berhad Ornapaper Berhad Petra Energy Berhad Protasco Berhad Sarawak Consolidated Industries Berhad Sealink International Berhad

2 3 4 5 6

109.81 1.038 -

- 0.258 0.0011 - 0.048 0.078 - 0.019

0.319 0.299 0.0086 0.516 0.286

7 8 9 10 11 12

- 0.225

-0.029 - 0.0014 0.216 0.17 - 0.012 0.022

0.089 0.285 0.584

13 14 15 16 17

- 0.067 - 0.624 -

-0.038 0.014 0.206 0.163 -0.835

0.284 0.0002 -

18

- 0.935

0.006

19 20 21 22 23 24 25

Sunway Holding Berhad Tanco Holding Berhad Thong Guan Industries Berhad VOIR Holding Berhad Three-A Resources Berhad A&M Realty Berhad AIKBEE Resources Berhad Airport Malaysia Holding Berhad Supermax Corporation Berhad Symphony House Berhad Swee Joo Berhad Sunway City Berhad Tasco Berhad ARK Resources Berhad Advance Synergy Berhad Baneng Holding Berhad BCT- Technology Berhad HDM- Carlaw Corporation Berhad

- 0.78 - 0.389 - 0.717 -1.79 -

0.0152 0.048 0.061 0.057 0.037 0.0007 0.001

0.062 0.332 0.0064 -

26

-4.85

0.011

0.38

27

-0.505

0.081

28 29 30 31 32

6.709 0.293 -0.324 -

-0.0021 0.00009 -0.082 0.045 2.51

0.036 0.00004 0.0031 0.18 0.49

33

-0.003

34

-1.40

0.53

35

-0.647

0.0004

36

-0.25

0.79

37 38

CME Group Berhad Coastal Contracts Berhad Ducth Lady Milk Industries Berhad Dufu Technology Corp.Berhad EMICO Holding Berhad Envair Holding Berhad Equator Life Science Berhad Favelle Farco Berhad Federal Furniture Holding (M) Bhd H-Displays (MSC) Berhad Hock Lok Siew Corporation Berhad Ho Hup Contruction Company Berhad Intelligent Edge Technology Berhad Kamdar Group (M0 Berhad KUB Malaysia Berhad LBS Bina Group Berhad LCL Corporation Berhad

-0.105

-0.002 0.103

0.003 0.12

39

-0.51

0.29

0.32

40

-0.32

0.05

0.203

41 42 43 44 45

-0.519 -

-0.042 -0.31 -0.212 0.069 -0.01

0.69 0.43 0.004

46

-58.7

47

-0.25

0.17

48

-0.13

0.0076

49

-0.96

0.012

50 51 52

-0.33 -

2.79 0.081 0.01

0.053 -

53

-3.9

54 55 56 57

Lee Swee Kiat Group Berhad Limahsoon Berhad Luster Industries Bhd Securities Services (Holdings) Berhad Maxtral Indusrty Berhad Mechmar Global Berhad Menang Corporation (M) Berhad Metronic Global Berhad Minetech Resources Berhad MINHO (M) Berhad Mitrajaya Holdings Berhad MLABS Systems Berhad Muda Holdings Berhad Malayan United Industries Berhad MUI Properties Berhad Oilcorp Berhad Oriental Holding Berhad Paragon Union Berhad Perwaja Holding

-1.69 -3.881 -0.06 -0.56

0.09 0.87

58

-0.009

0.29

59

-0.02

60

-0.006

0.59

61

0.029

62 63 64

-0.012 -0.025 0.13

0.542 0.00002

65 66 67 68 69 70 71 72

-0.56 -0.98 0.03 -

-0.004 0.16 0.003 0.29 -1930.61 0.067 -0.3 -0.005

0.78 0.64 0.0002 0.042 0.43 -

Berhad 73 74 POS Malaysia Berhad Putrajaya Perdana Berhad Puncak Niaga Holding Berhad PW Consolidated Berhad Rimbunan Sawit Berhad Scomi Group Berhad Scomi Engineering Berhad Scomi Marine Berhad Seacera Tiles Berhad Sinotop Holding Berhad Silver Ridge Holdings Bhd Superlon Holding Berhad Sycal Ventures Berhad SYF Resources Berhad TAFI Industries Berhad TPC Plus Berhad Tracoma Holdings Berhad Tradewinds Corporation Berhad -0.4 -0.81 0.083 0.11 0.2 0.001

75

-3.84

0.008

0.047

76

0.002

0.083

77 78 79 80 81 82

-0.26 0.411 -0.55 -2.27 -0.081 -

0.065 -0.008 0.04 0.008 0.046 -0.91

0.061 0.377 0.22 0.039 0.211 -

83

0.03

84 85 86 87 88 89

-1.95 -

0.05 -0.09 -0.042 0.005 -0.47 -0.17

0.11 0.02

90

-10.94

-0.003

0.0003

91 92

Unisem (M) Berhad Vastalux Energy Berhad Viztel Solutions Berhad Wang-Zheng Berhad Warisan TC Holdings Berhad Wonderful Wire & Cable Berhad WZ Steel Berhad Xian Leng Holding Berhad YNH Property Bhd KFC Holding (Malaysia) Berhad

-0.34 -

0.05 -0.004

0.063 0.007

93 94 95

-0.34 -0.88

0.74 0.053 0.38

0.35 0.18

96 97 98 99 100

-7.51 -0.89

0.25 0.016 -0.005 -0.0013 -0.06

0.14 1.57 0.31 -

Note: 1) The company that do not have a dividend payout ratio because the company no dividend has been paid or declared by the company since the end of the previous financial year. The director for that company also does not recommend the payment of any dividend in respect of the current financial year. 2) The company that do not have debt ratio because the company only have trade receivable for group only.

4.2 Empirical result This section examines the influence of on the influence of the largest and other large shareholders on the level of the dividend payout. The findings show that companies with lower debt ratios pay higher dividend payout. There is a strong and statistically significant, negative relationship between the variable representing company debt level and the dividend ratio. The relationship between large shareholder and dividend is negative.

5.0 Discussion This study finds that large shareholders have effects on Malaysian dividend policy. Our findings in this study also lend the strongest support to the agency theory suggests that large shareholders ownership may either alleviate or exacerbate agency conflicts. A high level of managerial ownership could minimize agency problems, as managers have to bear a portion of the losses arising from their divergent behavior (Jensen & Meckling, 1976). Agency theory also suggests that dividends can be used as a corporate governance (CG) mechanism to mitigate agency concerns. Our findings show that companies with lower debt ratios pay higher dividend payout. There is a strong, and statistically significant, negative relationship between the variable representing company debt level and the dividend ratio. As expected, the coefficients for variables representing the size of the company (SIZE) and profitability level (ROA) are positively and statistically significantly related dividend ratio.

Future research can tests whether the type of the largest shareholder, i.e. whether the large shareholder is a family or the Government, have an impact on dividend policy. Future studies could investigate the relationship between the large shareholders and dividend policy of East-Asian companies. In the future study also can test whether the more control variable such as investment, debt, and risk is affected to the dividend payout ratio.

6.0 Conclusion This study examines the relationship between large shareholders and dividend policy of Malaysian listed companies. Analysis has been carried out with the view that companies dividend policy may be used to expropriate wealth from minority shareholder. Malaysian provides an excellent setting to investigate the relationship as the corporate ownership structure is characterized as concentrated in nature. The shareholder controlling shareholders does influence the dividend policy of Malaysian listed companies. This study has find that the shareholder have effects on Malaysian dividend policy.

7.0 Reference
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Claessens, S., Djankov, S., Fan, J. P., & Lang, L. H. (2002). Disentangling the incentive and entrenchment effects of large shareholdings. The Journal of Finance , 2742.

Faccio, M., Lang, L. H., & Young, L. (2000). Dividends and expropriation. The American Economic Review , 4.

Goergen, M., Renneboog, L., & Silva, L. C. (2005). When do German films change their dividends? Journal of Corporate Finance , 357-399.

Holderness, C. G. (2003). A survey of blocholders and corporate control. FRBNY Economic Policy Rewiew , 51-60.

Jensen, M. C. (1986). Agency cost of free cash flow, corporate finance and takeovers. The American Economic Review , 3.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency cost and ownership structure. Journal of Financial Economics , 1-72.

Mancinelli, L., & Ozkan, A. (2006). Ownership structure and dividend policy:evidence from Italian firms. The European Journal of Finance , 265.

Maury, B., & Pajusti, A. (2002). Controling sahreholders. agency problems and dividend policy in Finland. Stockholm School of Business : Stockholm School of Economics.

Ramli, M. N. (2010). Ownership structure and dividend policy:evidence from Malaysia companies. International Review Of Business Research Papers , 170.

Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance , 737-774.

Shleifer, A., & Vishny, R. W. (1986). Large shareholder and corporate control. Journal of Political Economy , 461-465.

Zeckhauser, R. J., & Pound, J. (1990). Are large shareholders effective monitors? an investigation of share ownership and corporate performance. Chicago: University of Chicago Press.