Dividend payout and macroeconomy: Evidence from ASEAN country

Abstract

This research examines the dividend payout and macroeconomy of ASEAN countries. Macroeconomic conditions significantly influence dividend payout policies, as they reflect business prospects and forecast a firm's future cash-earning capacity. These conditions help management decide whether to distribute cash earnings as dividends or retain them for growth or precautionary reasons. Macroeconomic factors are typically categorized into Short-Term Macroeconomic Factors (STMF) and Long-Term Macroeconomic Factors (LTMF). Despite the straightforward logic behind these classifications, scholarly consensus remains elusive. This paper contributes to the ongoing debate by examining the impact of macroeconomic factors on dividend policies, focusing on non-financial companies in the ASEAN region—a dynamic global area. We analyzed a sample of 2,193 ASEAN companies using annual data from 2011 to 2021, resulting in 24,123 observations. Employing the General Method of Moments (GMM) dynamic panel regression, the study finds that STMF negatively affects dividend payouts, while LTMF positively influences them. This distinction between short-term and long-term impacts has significant practical and regulatory implications.  These findings hold up well when subjected to various robustness checks. Regulators need to maintain stable environment for firms by recognizing the importance of strong governance frameworks in fostering investor confidence, while investors need to be well-informed in response to uncertainty, as it can impact dividend and investment returns.