Do Corporate General Counsels Mitigate Agency Problems? Evidence from Dividend Policy Decisions

52 Pages Posted: 19 Feb 2019 Last revised: 23 Jul 2020

See all articles by Muhammad Jahangir Ali

Muhammad Jahangir Ali

La Trobe University - Department of Accounting and Management

Balasingham Balachandran

Dept of Economics, Finance and Marketing, La Trobe Business School, La Trobe University; Financial Research Network (FIRN)

Michael Michael

La Trobe University

Michael Theobald

University of Birmingham - Department of Accounting and Finance

Date Written: May 15, 2020

Abstract

We find that firms with a corporate general counsel in top management (TMC) are less likely to pay dividends, and for such firms that do pay dividends, the dividend payouts are lower. Our results hold addressing both endogeneity concerns and selection biases. We also find that the presence of a TMC will reduce the potential for overinvestment and that firms with TMCs invest less in CAPEX than firms without TMCs when there is a tendency to overinvest. Further, we find that firms with TMCs have a higher propensity to pay a dividend or have a higher payout ratio than firms without TMCs where there is the highest likelihood of agency costs deriving from overinvestment problems. Overall, our findings support the important role of the presence of a TMC as an effective corporate governance mechanism as evidenced by dividend decisions.

Keywords: Corporate General Counsel; Decision to pay Dividend; Dividend Payout; Agency Costs; Corporate Governance; Repurchases

JEL Classification: G14, G32, K00

Suggested Citation

Ali, Muhammad Jahangir and Balachandran, Balasingham and Michael, Michael and Theobald, Michael F., Do Corporate General Counsels Mitigate Agency Problems? Evidence from Dividend Policy Decisions (May 15, 2020). 2019 Financial Markets & Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=3337978 or http://dx.doi.org/10.2139/ssrn.3337978

Muhammad Jahangir Ali

La Trobe University - Department of Accounting and Management ( email )

Department of Economics and Finance
Victoria 3552, 3086
Australia

Balasingham Balachandran

Dept of Economics, Finance and Marketing, La Trobe Business School, La Trobe University ( email )

Dept of Economics, Finance and Marketing,
La Trobe Business School, La Trobe University
Bundoora, Victoria 3086
Australia
+61394793103 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Michael Michael

La Trobe University ( email )

Plenty Rd & Kingsbury Dr
Bundoora, VIC 3083
Australia

Michael F. Theobald (Contact Author)

University of Birmingham - Department of Accounting and Finance ( email )

Birmingham B15 2TT
United Kingdom
0121 414 6678 (Fax)

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