Dividend Payouts and Corporate Governance Quality: An Empirical Investigation

Jiraporn, Pornsit; Kim, Jang Chul; Kim, Young Sang

doi:10.1111/j.1540-6288.2011.00299.x

Cited by 211 publications

(251 citation statements)

References 52 publications

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“…Garay and González (2008) and Chong and López-de-Silanes (2006) confirmed the existence of an association between corporate governance quality and dividend payouts. The findings (Adjaoud and Ben-Amar;2010;Jiraporn et al;2011;Mitton, 2004) show that companies set dividend policies in line with outcome agency model of dividends and show that dividend payouts are higher in strong corporate governance settings. They show that shareholder protection should explain at both country-level investor protection and firm-level corporate governance and these serve as substitutes or complements.…”

Section: Chapter 3 3 Literature Reviewmentioning

confidence: 79%

“…LLSV describe this as a "testable implication" of the outcome agency model, but argue that a negative relationship between dividend payouts and growth opportunities with a relatively less steep slope for low protection countries exists (i.e., see Figure 1 in LLSV, 2000, p. 7). Several studies support the outcome agency model and show that dividend payouts are higher in strong corporate governance settings (Adjaoud and Ben-Amar, 2010;Jiraporn et al, 2011;Mitton, 2004).…”

Section: List Of Figuresmentioning

confidence: 88%

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Investor protection and dividend policy: The case of Islamic and conventional banks

Athari

Adaoglu

Bektaş

2016

Emerging Markets Review

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This study examines the dividend policy behavior of Islamic and conventional banks operating in Arab markets. I examine countries included in Gulf Cooperation Council and Middle East and North Africa. These banks operate in an environment characterized by Sharia law and low levels of investor protection. I expect that in Arab countries, financial institutions have more potential to exploit the minority shareholders by using the dividend policy. I also expect that within the framework of agency theory, both types of banks set their dividend policies differently.By using the dynamic partial adjustment dividend model for the period 2003-2012, I find that both types of banks follow stable dividend policies having the similar speed of adjustment coefficients. However, conventional banks have relatively more stable and less responsive dividend policies to the changes of earnings. Contrary to the agency theory predictions of higher actual and target dividend payout ratios for Islamic banks, both ratios are substantially lower. Islamic banks in these markets have relatively more willing to payout less dividends and use free cash flow for their personal benefits. In contrast, conventional banks experience relatively less significant agency problems and have more willing to payout higher dividends.The empirical results also show that in an environment characterized by Sharia law and low levels of investor protection, Islamic and conventional banks set their dividend policies in line with substitute and outcome agency model of dividends, respectively. Islamic banks payout lower dividends and use the dividend policy as a substitute mechanism for alleviating relatively more significant agency problems. Subiv classification index results show that Islamic banks increase dividends in response to weak minority investor protection, specifically the inability of shareholders to get corporate documents during litigation against firms. In these markets, conventional banks payout higher dividends as an outcome of strong protection for shareholder rights. Sub-classification index results show that conventional banks increase dividends in response to stronger minority investor protection, specifically for the director liability and the amount of disclosure of related party transactions.

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Section: Chapter 3 3 Literature Reviewmentioning

confidence: 79%

Section: List Of Figuresmentioning

confidence: 88%

Investor protection and dividend policy: The case of Islamic and conventional banks

Athari

Adaoglu

Bektaş

2016

Emerging Markets Review

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“…According to the agency theory of Jensen (1986), agency costs resulting from the divergence of ownership and control determine dividend policy. Due to these agency costs, managers may not always implement a dividend policy that maximizes shareholder benefits but rather they may choose a dividend policy that maximizes their own personal benefits (Jiraporn et al, 2011). Shleifer and Vishny (2000) assert that agency costs are lower in companies with high managerial ownership due to the better alignment of interests between managers and shareholders and in companies with more concentrated ownership that are better able to control managerial activities.…”

Section: Literature Reviewmentioning

confidence: 99%

Corporate Governance and Dividend Policy : An Empirical Analysis From Borsa Istanbul Corporate Governance Index (XKURY)

Aydin¹,

Cavdar²

2015

AFR

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The aim of this research is to analyze the potential relationship between corporate governance and dividend policy. To conduct this research, a sample of 19 corporations from the Borsa Istanbul (BIST) Corporate Governance Index (XKURY), which is composed of listed companies who accomplished a certain level of Corporate Governance Principles over the period of 2007-2014, were selected. OLS (Ordinary Least Squares) panel regression analysis has been performed. The potential relationship between ownership structure and dividend policy has also been analyzed by utilizing the independent variables of ownership concentration, managerial ownership and total foreign ownership. In addition to our independent variables, we also included return on equity (ROE) and firm size to our research in order to increase the explanatory power of our model. This study finds an insignificant relationship between corporate governance and dividend policy. On the other hand, we obtained significant positive relationship between total foreign ownership and dividend policy and significant negative relationships between ownership concentration and dividend policy and managerial ownership and dividend policy. Finally, we obtained significant negative association between return on equity (ROE) and dividend policy and significant positive association between firm size and dividend policy.

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“…Jiraporn et al (2011) find that firms that have enhanced shareholder rights are more likely to pay dividends, and that those that do pay a dividend pay larger dividends. Using a sample of firms listed on the Toronto Stock Exchange, Adjaoud and Ben-Amir (2010) find that stronger shareholder rights lead to higher dividend payments, also supporting the outcome hypothesis.…”

Section: Literature Surveymentioning

confidence: 95%

“…There is empirical evidence supporting the outcome hypothesis. Jiraporn, Kim and Kim (2011) find that firms with strong shareholder rights are more likely to pay a dividend, and dividend-paying firms with strong shareholder rights tend to pay higher dividends. Examining a sample of Canadian firms, Adjaoud and Ben-Amir (2010) find a positive association between shareholder rights and dividends.…”

Section: Introductionmentioning

confidence: 96%

Dividend Policy and Agency Effects: A Look at Financial Firms

Haye¹

2014

IJEF

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This paper attempts to determine the relationship between the dividend policy of financial firms and a number of ownership and board control variables as well as two governance provisions-cumulative voting and staggered boards. Agency theory contends that dividends can be used as a substitute control device when ownership, board or governance provisions are unfavorable for shareholders. The evidence indicates that firms with lower CEO, institutional and hedge fund ownership pay higher dividends. Also, cumulative voting has a greater impact on dividend policy than staggered boards. These results suggest that firms adjust their dividend policy in response to control changes caused by ownership structure and governance provisions.

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Dividend Payouts and Corporate Governance Quality: An Empirical Investigation

Cited by 211 publications

References 52 publications

Investor protection and dividend policy: The case of Islamic and conventional banks

Investor protection and dividend policy: The case of Islamic and conventional banks

Corporate Governance and Dividend Policy : An Empirical Analysis From Borsa Istanbul Corporate Governance Index (XKURY)

Dividend Policy and Agency Effects: A Look at Financial Firms

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