Does Investor Protection Affect Managements’ Decision to Pay Dividend? Evidence from South Asia

Abstract

During last fifty years, financial researchers seem unable to reach a consensus on determinants of dividend policy (Al-Malkawi, 2007). The scope of majority of recent studies was limited to a single country, whereas, a little attention was given to cross country comparison of factors affecting dividend policy especially in emerging economies. The present study attempts to fill this gap by analyzing the data from listed companies of four South Asian countries i.e. Bangladesh, India, Pakistan and Sri Lanka, using OLS, Tobit and Logit regression models. The main focus of this study is to analyze the impact of investor protection on management’s decision to pay dividends. The results support the dividend outcome model as proposed by (La Porta et. al., 2000). Present study also highlights the importance of creditor rights and national culture in influencing managerial decision to pay dividends.

Keywords: Dividend Policy, Investor Right Protection