We find that Hofstede's cultural dimensions-uncertainty avoidance, masculinity, and long-term orientation-remain significant in the determination of firms' dividend policies, even after controlling for corporate governance. We also show that this association varies with the strength of corporate governance, measured by the degree of investor protection. Hence, national culture and investor protection independently affect firms' dividend payouts but also interact with each other, such that strong investor protection induces higher dividend payouts in high uncertainty avoiding and/or highly masculine cultures. Our results provide strong evidence that cultural differences matter and offer additional power in explaining variations in dividend policies.

This study examines the effect of institutional ownership on dividend payouts through the lens of agency theory. We hypothesize that only institutions with certain traits are likely to monitor. Monitoring institutions will use dividend payouts as a tool to mitigate firms' agency problems, conditional on those firms' financial performance. We find that (1) there is a positive relation between lagged long-term institutional ownership with a large stake and the dividend payout ratio; (2) the positive relation is more salient in firms with high agency costs; and (3) the positive relation is more salient when external monitoring is weak. These findings support that (1) concentrated and long-term institutional investors play a monitoring role and (2) monitoring institutions use dividend payouts as a monitoring device. Our findings are robust to endogeneity tests, level and change models, alternative income-based dividend payout measures, alternative measures of long-term institutions, and sub-period analyses.

Accepted:Problem/ Relevance -The relationship between dividend yields and stock returns is an unresolved issue in finance. Previous papers show mixed results on the relationship. To clarify the relationship, we consider dividend reputation. We investigate whether dividend reputation plays a role in explaining the relationship between dividend yields and stock returns.Research Objective/ Questions -We hypothesize that firms with dividend reputation tend to have less risk compared to firms without dividend reputation, and the expected return of firms with dividend reputation will be lower given the dividend yield, which is called the "reputation effect." A mix of firms with and without dividend reputation in a sample could distort the relationship between stock returns and dividend yields. We group stocks according to reputation and analyze the relationship between dividend yields and stock returns.Methodology -We construct our sample from all firms listed on the NYSE, AMEX, and NASDAQ stock exchanges. In our analysis, reputation effects are included to analyze the relationship between dividend yields and stock returns. We divide our sample firms into three groups according to the track record of dividend payments to control for reputation effects: (1) reputation-established firms, (2) reputation-building initiation, and (3) no reputation firms. To test the hypotheses, we run the panel regression with reputation variables and the control variables.Major Findings -We find that the reputation effect is strongest for reputation-established firms and a weaker reputation effect for reputation-building younger firms. After controlling the reputation effect and other relevant variables, we find that there does exist a significantly positive relationship between dividend yields and stock returns.Implications -The empirical results show that the reputation effect is higher for established firms with a good track record of dividend payments than for firms with a short history of dividend payments or for firms with an unreliable history of dividend payments. After controlling the reputation effect and other relevant variables, we find there exists a significantly positive relationship between dividend yields and stock returns. We also find that one year is not enough time for firms to build a dividend reputation.

No abstract

We provide empirical evidence that support both "outcome" and "substitute" models of agency theories related to cash holding. Local long-term institutional investors are associated with lower excess cash in firms with less growth and easier access to external financing, and with higher excess cash in firms with higher growth in our U.S. sample.