Corporate Governance and Dividend Policy in Poland

Abstract

The goal of this paper is twofold. First, we explore the determinants of the dividend policy in Poland. Second, we test whether corporate governance practices determine the dividend policy in the non-financial companies listed on Warsaw Stock Exchange. We compose, for the first time, quantitative measures on the quality of the corporate governance for 110 non-financial listed companies. Our results suggest that large and more profitable companies have a higher dividend payout ratio. Furthermore, riskier and more indebted firms prefer to pay lower dividends. The findings finally, based on the period 1998-2004, demonstrate that an increase in the TDI or its subindices that represent corporate governance practices brings about a statistically significant increase in the dividend-to-cash-flow ratio. Moreover, the estimates prove to be significant after the inclusion of standard additional controls.

Keywords: corporate governance, dividend policy, agency theory

JEL Classification: G30, G32, G35