Board Reforms and Dividend Policy: International Evidence
Journal of Financial and Quantitative Analysis, Forthcoming
46 Pages Posted: 3 Mar 2020 Last revised: 18 May 2020
Date Written: February 4, 2020
We study the impact of board reforms implemented in 40 countries worldwide on corporate dividend policy. Using a difference-in-differences analysis, we find that firms pay higher dividends following the reforms. The increase in dividend payouts is more pronounced for firms with weak board governance in the pre-reform period and those in countries with strong external governance mechanisms. Our findings corroborate the dividend outcome model, which postulates that board reforms strengthen the monitoring role of the board and empower outside shareholders to force management to disgorge dividends.
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