Do Transparent Firms Pay Out More Cash to Shareholders? Evidence from International Cross-listings

Abstract

This article examines the relationship between agency costs and corporate payout policies using a sample 755 firms that cross-list shares abroad. I document that firms cross-listing on exchanges with comparatively high standards of transparency and shareholder protection increase their cash payouts to shareholders by about 9% of earnings after cross-listing. The shift in payout policy is more pronounced in firms controlled by management, and it is not observed if external shareholder protection in the country of incorporation is already strong, or if the host exchange does not mandate additional disclosure. These findings provide support for the theory of La Porta et al. (2000) that high corporate payouts are the outcome of transparency and shareholder protection.

Keywords: Dividend policy, payout policy, cross-listing, ADRs

JEL Classification: G35, G38