Culture, Agency Costs, and Dividends

46 Pages Posted: 6 Mar 2008 Last revised: 5 Mar 2015

See all articles by Jana P. Fidrmuc

Jana P. Fidrmuc

Warwick Business School - Finance Group

Marcus Jacob

WHU - Otto Beisheim School of Management

Date Written: April 21, 2010


This paper presents a culturally rooted agency explanation for differences in dividend payout policies around the world. We conjecture that the social normative nature of culture influences the character of agency relations and determines the acceptance and legitimacy of different dividend payout strategies across different countries. By linking dividends to cultural differences across 5,797 firms in 41 countries, our analysis shows that high individualism, low power distance, and low uncertainty avoidance are significantly associated with higher dividend payouts. A comprehensive set of robustness tests in which we control for legal institutions, share repurchases, corporate debt ratios, and ownership structures confirms that culture is a relevant factor when analyzing dividend distributions. Our results further show that legal institutions and culture as a social institution have complementary effects on dividend payouts. Overall, our finding that culture matters suggests important implications for a wide range of agency-based economic and capital market phenomena.

Keywords: Dividends, Agency Problems, Culture, Law and Finance

JEL Classification: G28, G35, K00, Z10

Suggested Citation

Fidrmuc, Jana P. and Jacob, Marcus, Culture, Agency Costs, and Dividends (April 21, 2010). Journal of Comparative Economics, Vol. 38, No. 3, pp. 321-339, 2010, Available at SSRN:

Jana P. Fidrmuc

Warwick Business School - Finance Group ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Marcus Jacob (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics