Growth Opportunities, Information Asymmetry, and Dividend Payout: Evidence from Mandatory IFRS Adoption

64 Pages Posted: 13 Mar 2020

See all articles by Arkaja Chakraverty

Arkaja Chakraverty

International College of Economics & Finance, HSE

Nishant Agarwal

Indian School of Business (ISB), Hyderabad; The University of Western Australia - UWA Business School

Date Written: December 20, 2019

Abstract

We study changes in firms’ dividend policies in response to an exogenous improvement in the information environment, enabled by IFRS adoption, between investors and firms. We document that the relationship between information asymmetry reduction and dividend payout policy is not monotonic but in fact depends upon a firm’s underlying growth opportunities. Following mandatory adoption of IFRS, firms with low growth opportunities exhibit a higher propensity to pay dividends. Conversely, those firms with high growth opportunities exhibit reduced propensity to pay dividends. These results are also consistent for dividend payout ratio. Together, they suggest that a firm’s growth rate plays a key role in determining the effect of an improved information environment on the firm’s dividend policies.

Keywords: Information asymmetry; dividend; growth opportunities; IFRS

JEL Classification: M41, G35

Suggested Citation

Chakraverty, Arkaja and Agarwal, Nishant, Growth Opportunities, Information Asymmetry, and Dividend Payout: Evidence from Mandatory IFRS Adoption (December 20, 2019). Indian School of Business, Available at SSRN: https://ssrn.com/abstract=3549662 or http://dx.doi.org/10.2139/ssrn.3549662

Arkaja Chakraverty (Contact Author)

International College of Economics & Finance, HSE ( email )

26 Shabolovka
Moscow
Russia

Nishant Agarwal

Indian School of Business (ISB), Hyderabad ( email )

H-12, SV-4, Indian School of Business
Gachibowli
Hyderabad, Gachibowli 500 032
India
9810004119 (Phone)

HOME PAGE: http://www.isb.edu

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia

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