Role of Corporate Governance and Lifecycle in Determining Payout Precommitment in an Emerging Economy
NUI Maynooth Department of Economics Finance & Accounting Working Paper N. 297-20
46 Pages Posted: 13 Apr 2020
Date Written: March 17, 2020
We analyze the role of firm-level corporate governance in determining the precommitment payout policy of emerging market firms and investigate if there is a precommitment lifecycle effect. Unlike previous studies for the U.S. firms, we only find evidence of precommitment among relatively well-governed firms, who combine good governance with large dividend payouts to shareholders and large debt-related repayments to creditors. We also document a strong precommitment lifecycle effect. Firms in the growth and mature stages of their lifecycle tend to use both debt and dividends to precommit to investors, with an increasing proportion of dividends in total payout measures. Our results are robust to an array of control variables, alternate payout proxies, firm-level corporate governance and addresses any potential endogeneity concerns in the sample.
Keywords: Precommitment payout, corporate governance, lifecycle effects, emerging market
JEL Classification: G32, G35
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