Dividend Payouts and Corporate Governance Quality: An Empirical Investigation

29 Pages Posted: 11 Apr 2011

See all articles by Pornsit Jiraporn

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Jang-Chul Kim

Northern Kentucky University - Haile/US Bank College of Business

Young Sang Kim

affiliation not provided to SSRN

Date Written: May 2011

Abstract

Motivated by agency theory, we investigate how a firm's overall quality of corporate governance affects its dividend policy. Using a large sample of firms with governance data from The Institutional Shareholder Services, we find that firms with stronger governance exhibit a higher propensity to pay dividends, and, similarly, dividend payers tend to pay larger dividends. The results are consistent with the notion that shareholders of firms with better governance quality are able to force managers to disgorge more cash through dividends, thereby reducing what is left for expropriation by opportunistic managers. We employ the two-stage least squares approach to cope with possible endogeneity and still obtain consistent results. Our results are important as they show that corporate governance quality does have a palpable impact on critical corporate decisions such as dividend policy.

Keywords: dividend policy, corporate governance, agency theory, agency costs

JEL Classification: G30, G32, G34

Suggested Citation

Jiraporn, Pornsit and Kim, Jang-Chul and Kim, Young Sang, Dividend Payouts and Corporate Governance Quality: An Empirical Investigation (May 2011). Financial Review, Vol. 46, Issue 2, pp. 251-279, 2011. Available at SSRN: https://ssrn.com/abstract=1805399 or http://dx.doi.org/10.1111/j.1540-6288.2011.00299.x

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Jang-Chul Kim

Northern Kentucky University - Haile/US Bank College of Business ( email )

Dept of Accounting, Finance, and Business Law
Highland Heights, KY 41099
United States
859-572-1486 (Phone)

Young Sang Kim

affiliation not provided to SSRN

No Address Available

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
1,211
PlumX Metrics