Corporate Governance and Dividend Policy in the Presence of Controlling Shareholders

Abstract

Based on agency theory, we focused on the influence of corporate governance in the dividend policy of large listed firms with headquarters in continental Europe countries. Previous research focused on the influence of corporate governance on the performance and risk of listed firms, but the influence of corporate governance on the dividend policy has rarely been addressed despite the importance of dividends for shareholders and the implications on the free cash-flow, whose application may be a source of conflicts between managers and shareholders. In this paper, we study the influence of a set of governance mechanisms on the dividend policy over 12 years (2002 to 2013). The results, based on a panel data analysis, support the importance of governance mechanisms toward the protection of shareholders’ interests, and reveal that the decisions on whether to pay dividends and how much to pay are grounded on different antecedents.

Does Corporate Governance Affect the Critical Corporate Policies Such as Dividend Policy?

“…In addition, we find that the shareholding and compensation index is a key determinant of dividend payouts. This result is consistent with the findings reported by Rohov et al (2020), Rodrigues et al (2020) and Roark (2011). Specifically, Rohov et al (2020) find that ownership is the most important factor in dividend decisions based on a sample of non-financial joint-stock Ukrainian companies.…”

“…Specifically, Rohov et al (2020) find that ownership is the most important factor in dividend decisions based on a sample of non-financial joint-stock Ukrainian companies. The study by Rodrigues et al (2020) also shows that the remuneration of the CEO has an effect on dividend yields. In addition, Rodrigues et al (2020) report that corporate governance is important for stimulating dividends payouts even in the presence of controlling shareholders.…”

“…The study by Rodrigues et al (2020) also shows that the remuneration of the CEO has an effect on dividend yields. In addition, Rodrigues et al (2020) report that corporate governance is important for stimulating dividends payouts even in the presence of controlling shareholders. Moreover, Roark (2011) examines the corporate governance of REITs, which have a unique regulatory requirement of minimum dividend payments to shareholders.…”

“…The authors report that while the proportion of board independence, board tenure, board size and CEO duality have positive (but statistically mixed) relations with dividend payouts, board diversity and board member age have negative relations with dividend payouts. Another study by Rodrigues et al (2020) who examine listed firms in continental European countries reports significant difference in board diversity and board tenure between dividend-paying and non-dividend-paying firms. The authors also adopt a Tobit model and find the board size, board diversity, tenure, number of board meetings, network of board members, and remuneration of the CEO are important determinants of dividends.…”

The Effect of Risk, R&D Intensity, Liquidity, and Inventory on Firm Performance during COVID-19: Evidence from US Manufacturing Industry

“…To assess if our findings are robust across these issues, we conduct feasible generalized least squares regression. This technique allows estimation in the presence of AR(1) autocorrelation within heteroscedasticity across cross-sectional correlations (Rodrigues et al 2020;Yousef et al 2020;Yüzbaşı and Ahmed 2020). The results for these robustness checks are reported in Tables 3-5, which show identical results to those in Table 2.…”