Does Geography Matter? Firm Location and Corporate Payout Policy

44 Pages Posted: 21 Mar 2008 Last revised: 22 Jan 2013

See all articles by Kose John

Kose John

New York University (NYU) - Department of Finance

Anzhela Knyazeva

Independent; New York University (NYU) - Leonard N. Stern School of Business

Diana Knyazeva

Independent

Date Written: March 1, 2011

Abstract

We investigate the impact of geography on agency costs and firm dividend policies. We argue that remote firm location increases the cost of shareholder oversight of managerial investment decisions. We hypothesize that remotely located firms facing free cash flow problems precommit to higher dividends to mitigate agency conflicts. We find that remotely located firms pay higher dividends. As expected, the effect of geography on dividends is most pronounced for firms with more severe free cash flow problems. Further, remotely located firms rely more on regular dividends instead of special dividends or share repurchases and decrease dividends less often.

Keywords: geography, firm location, proximity to shareholders, dividends, payout policy

JEL Classification: G30, G31, G35, G39

Suggested Citation

John, Kose and Knyazeva, Anzhela and Knyazeva, Diana, Does Geography Matter? Firm Location and Corporate Payout Policy (March 1, 2011). Journal of Financial Economics (JFE), 2011, Volume 101, 533–551; AFA 2009 San Francisco Meetings Paper; EFA 2008 Athens Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1101641

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

Anzhela Knyazeva (Contact Author)

Independent ( email )

No Address Available

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Diana Knyazeva

Independent ( email )

No Address Available

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