Do Firms Change Dividend Policy After Certified or Revoked Shariah-Compliant Status? A Study of Dividend Payout Decisions on Firms in Bursa Malaysia

Based on the profit sharing concept of Islamic investment, payment of annual dividend is a method of wealth distribution for profits earned by firms. However dividend payout is not compulsory in conventional investment. Among the reasons to hold back dividend payment is for investment purposes which is necessary for both wealth maintenance and growth. Of course, if the investment rate is very high, the present shareholders or investors are deprived of wealth distribution for the benefit of future investors which is against the spirit of profit and losssharing of a partnership in Islam. The question is, would firms change their dividend policy to cater for tacit requirement of divident payment by Islamic investment once certified shariahcompliant status and reverses the policy when shariah-compliant status revoked? Hence, this study, investigates the impacts of the shariah-compliant status of firms in Bursa Malaysia on their dividend payout behavior by analysing their preand post-shariah-compliant years data. The results showed that the shariah-compliant status of firms has positive impacts on firms’ dividend payout decisions. The revocation of the status, startlingly, does not necessarily overturn the long-held dividend policies of the firms. Instead, the firms maintain consistent dividend policy, perhaps in an effort not to portray negative overtone related to the annulment of the shariah-compliant status to the stockholders and the market.