Political Uncertainty and Dividend Policy: Evidence from International Political Crises

Journal of International Business Studies, Forthcoming

68 Pages Posted: 6 Feb 2013 Last revised: 16 Jan 2015

See all articles by Tao Huang

Tao Huang

Beijing Normal University-Hong Kong Baptist University United International College

Fei Wu

Jiangxi University of Finance and Economics

Jin Yu

Monash University -Department of Banking and Finance

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Multiple version iconThere are 2 versions of this paper

Date Written: January 15, 2015

Abstract

We examine the impact of political uncertainty on firms' payout policy. Using a large international sample across 35 countries over the period from year 1990 to 2008, we find that past dividend payers are more likely to terminate dividends and that non-payers are less likely to initiate dividends during periods of high political uncertainty. These findings suggest a precautionary incentive of managers in response to political shocks. Nevertheless, the impact of political shocks seems to be attenuated by stable political systems. In addition to identifying this precautionary incentive, we also document that firms with lower market valuation or less liquidity are more likely to initiate dividends during periods of high political uncertainty, which is consistent with the catering theory of dividends.

Keywords: Political crisis, Dividend policy, Political uncertaincy

JEL Classification: G15, G35

Suggested Citation

Huang, Tao and Wu, Fei and Yu, Jin and Zhang, Bohui, Political Uncertainty and Dividend Policy: Evidence from International Political Crises (January 15, 2015). Journal of International Business Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2212481 or http://dx.doi.org/10.2139/ssrn.2212481

Tao Huang (Contact Author)

Beijing Normal University-Hong Kong Baptist University United International College ( email )

2000 Jintong Road
Zhuhai, Guangdong 519087
China

Fei Wu

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Jin Yu

Monash University -Department of Banking and Finance ( email )

Melbourne
Australia
+61 3 99034590 (Phone)

HOME PAGE: http://sites.google.com/site/jinyufinecon/

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen ( email )

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