Are boards ‘substitute’ or ‘complement’ dividend payout? Econometric evidence for Indian banks

Abstract

This study econometrically tests the ‘substitution’ versus ‘outcome’ hypotheses by examining the impact of board governance on the dividend payout policy in the Indian banking industry. The analysis is confined to the period from 2005 to 2018. The results reveal a significant positive influence of overall board quality on the magnitude of payouts, supporting the ‘outcome hypothesis’. At the disaggregated level, independent directors, female directors, chief executive officer duality, and board meetings significantly influence the dividend policy of Indian banks. Our further investigation of the board‐dividend nexus at the ownership level shows that this complement relation is only visible in private banks (PBs). While the ‘substitution hypothesis’ holds in public sector banks (PSBs). The results suggest that good governed PBs use dividends as a complementary measure of monitoring mechanism. In contrast, governed boards of PSBs take conservative financial decisions and declare a low dividend. The findings are robust at disaggregate level, corroborating our main findings and additional analyses, including propensity score matching depicting that our conclusions are not beset by endogeneity or selection bias.

Co-integrating relation between pay, board governance and performance: evidence from Indian banking

“…Bartlett and Kaiser–Meyer–Olkin tests confirm the validity of PCA on our data set. For the reliability of the variables, the chosen board attributes are measured following the principles recommended by the regulatory authorities as well as the previous studies on board governance (see, for instance, Bhatia and Gulati, 2022, 2020; Gulati et al , 2022). A higher mean value of the board index denotes better board quality.…”

Dearer Caste and Cheaper Lives: The SC and ST (Prevention of Atrocities) Act and the Double Violence of Law in India

“…In the Bathani Tola massacre case, the sessions court initially convicted all 23 of the 68 accused, sentencing three to death and 20 to life imprisonment, but the decision was later reversed by the High Court acquitting all the accused. [6][7][8] In Tsundur, 21 Dalits were massacred in a brutal manner by upper caste Reddy's with the alleged connivance of the police, and the SCs were wilfully harassed by the police administration and denied justice. 9,10 In Khairlanji, the exhibition of brutal attacks intending exemplary caste punishment and the alleged compliance of the local administration and sections of the media is thoroughly recorded too.…”