The purpose of this paper is to empirically investigate the effects of corporate governance on the dividend payout in Australia where dividend payout remains high and the corporate governance system has been strengthened. Design/methodology/approach: A self-constructed governance index from 2001 to 2013 is used to test the effect of corporate governance on dividend payouts. Two versions of the indexes, and the traditionally emphasized governance elements, such as board structure, are also used for the robustness checks. A random effect panel Tobit model is employed to test the factors influencing dividend payout decision. Findings: Estimation results report a positive effect of governance, combined with firm size and profitability, on dividend payouts. In contrast, financial distress and the GFC have a negative effect on dividend policy. Finding of further examinations imply that the positive effect of governance is attenuated by growth opportunities, while intensified by the franked dividend. Originality/value: In this paper, the sample period and the governance index, respectively, are the longest and the most comprehensive among existing studies in the case of Australia. This paper also combined the traditional governance-dividend theme with corporate tax, particularly the unique franked dividend tax system.

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