Corporate governance and dividend strategy: lessons from Australia

Abstract

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.

Dividend policy, investment opportunity set, free cash flow, and company performance: Indonesian’s agricultural sector

“…The IOS shows the existence of favorable growth prospects or opportunities, reflecting that Based on Table 1, dividend policy reflected through the value of the Dividend Payout Ratio (DPR) shows an unstable and fluctuating value and tends to be avoided by investors who want certainty in return on investment. The company needs to maintain its dividend policy on an ongoing basis so that investors can interpret the situation as a signal on the company's performance (Shamsabadi & Chung, 2016). The total assets of the agricultural sec-Dividend policy, investment opportunity set, free cash flow, and company performance: Indonesian's agricultural sector Choiri Chosiah, Budi Purwanto, Wita Juwita Ermawati | 405 | the company can manage additional share capital in increasing productive assets having the potential to increase company growth (Pratiwi, 2016).…”

“…The application of corporate governance in the company is also known to influence the company's dividend policy. Shamsabadi & Chung (2016); Jiraporn, Kim, & Kim (2011);Elmagrhi et al (2018); demonstrated a positive relationship between the Jurnal Keuangan dan Perbankan Volume 23, Issue 3, July 2019: 403-417 | 406 | quality of governance and dividend payments, where good governance will make managers release more of their profits as dividends. Jiraporn & Ning (2006) showed that dividend payments are inversely proportional to shareholder power.…”

“…Corporate governance is a system in which companies are directed and controlled and the board of directors is responsible for corporate governance to satisfy the interests of shareholders (Cadbury, 1992). It emerged as a mechanism to overcome agency problems occurring between principals (shareholders) and agents (managers) who often have different interests (Baker & Jabbouri 2016;Shamsabadi & Chung, 2016). The implementation of corporate governance, especially in companies go public is important because it has an impact on the company's competitive advantage in the public (Hidayati & Sunaryo, 2014).…”

Guest editorial

“…In the fifth paper, Shamsabadi et al (2016) examine dividend policy as a means of ensuring that profits are distributed to investors rather than consumed by management through private benefits. While committing cash flow to interest or dividends as a means of stemming agency problems has a long history of examination (i.e.…”

“…Shamsabadi et al (2016) study dividends as a possible solution to reducing free cash flow, noting how payout differs depending on firm-level corporate governance and taxation regime while Li et al (2016) ask whether corporate social responsibility (CSR) has become a vehicle for managers to promote their own public image at the expense of shareholders.…”