Dividends, Asymmetric Information, and Agency Conflicts: Evidence from a Comparison of the Dividend Policies of Japanese and Us Firms

Abstract

This paper compares dividend policies of US and Japanese firms, partitioning Japanese data into keiretsu, independent, and hybrid firms. Patterns in the data are consistent with the hypothesis that Japanese dividends are less informative. Specifically, Japanese firms experience smaller stock price reactions to dividend omission and initiation announcements than US firms. The data are also consistent with the hypothesis that the dividend policies of Japanese firms, and especially keiretsu-member firms, are less constrained by agency conflicts and information asymmetries. Keiretsu managers are less reluctant to cut dividends and their dividends are more responsive to earnings changes.

JEL Classification: G35, F39