Corporate Governance and Dividend Payout Policy: Beyond Country-Level Governance

54 Pages Posted: 30 Jun 2017 Last revised: 4 Jul 2017

See all articles by Bin Chang

Bin Chang

University of Ontario Institute of Technology (UOIT)

Shantanu Dutta

The University of Ontario Institute of Technology (UOIT)

Samir Saadi

School of Management, University of Ottawa

Pengcheng Zhu

University of San Diego

Date Written: June 29, 2017

Abstract

We address the mixed empirical findings on how corporate governance affects dividend payout policy by analyzing a large sample of firms from 30 countries. Our results indicate that firms with better firm-level governance pay more dividends, even when we control for country-level governance. However, this relation is only pronounced in countries with low shareholder rights. In addition, we find that when shareholder rights index is high, firm-level governance is unrelated to dividend payout. Our results are robust to the choice of firm-level governance index, the inclusion of the originality of law, culture, creditors’ rights, alternative measures of dividend payout, the hierarchical modeling technology, and approaches to address endogeneity concerns. We also find that dividend payments are associated with higher firm value, and investors positively value the dividend payments of poorly governed firms.

Keywords: Dividend policy; corporate governance; agency cost

JEL Classification: G34; G35

Suggested Citation

Chang, Bin and Dutta, Shantanu and Saadi, Samir and Zhu, Pengcheng, Corporate Governance and Dividend Payout Policy: Beyond Country-Level Governance (June 29, 2017). Available at SSRN: https://ssrn.com/abstract=2994960 or http://dx.doi.org/10.2139/ssrn.2994960

Bin Chang (Contact Author)

University of Ontario Institute of Technology (UOIT) ( email )

2000 Simcoe Street North
Oshawa, Ontario L1H 7K4
Canada

Shantanu Dutta

The University of Ontario Institute of Technology (UOIT) ( email )

2000 Simcoe Street North
Oshawa, Ontario L1H 7K4
Canada

Samir Saadi

School of Management, University of Ottawa ( email )

136 Jean-Jacques Lussier
Ottawa, Ontario K1N 6N5
Canada

Pengcheng Zhu

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

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