Payout Policy, Agency Conflicts, and Corporate Governance

John, Kose; Knyazeva, Anzhela

doi:10.2139/ssrn.841064

Cited by 145 publications

(173 citation statements)

References 13 publications

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“…The current study used dividend per share because it is considered as a reliable measure of firms' dividend payment policy (Charalambidis & Papadopoulos, 2007). Additionally, and consistent with previous studies (e.g., Esqueda, 2016;Jiraporn et al, 2011;John & Knyazeva, 2006), this study employs the ratio of dividends to total assets as alternative proxy to check the robustness of our findings. Second, our main independent variables are board size (BS), board independence (BI), CEO duality (CEO), frequency of board meetings (BM), board gender diversity (BG) and audit committee size (AS).…”

Section: Definition Of Variables and Model Specificationsupporting

confidence: 57%

Corporate governance and dividend pay-out policy in UK listed SMEs

Elmagrhi

Ntim

Crossley

et al. 2017

IJAIM

118

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Section: Definition Of Variables and Model Specificationsupporting

confidence: 57%

Corporate governance and dividend pay-out policy in UK listed SMEs

Elmagrhi

Ntim

Crossley

et al. 2017

IJAIM

118

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“…In a study by Kowalewski et al (2008), they pointed out that corporate governance has a positive relationship with the dividend payout. In contrast, John and Knyazeva (2006) show under weak governance condition, shareholders are more likely to receive more dividends. Garay and González (2008) and Chong and López-de-Silanes (2006) confirmed the existence of an association between corporate governance quality and dividend payouts.…”

Section: Chapter 3 3 Literature Reviewmentioning

confidence: 79%

Investor protection and dividend policy: The case of Islamic and conventional banks

Athari

Adaoglu

Bektaş

2016

Emerging Markets Review

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This study examines the dividend policy behavior of Islamic and conventional banks operating in Arab markets. I examine countries included in Gulf Cooperation Council and Middle East and North Africa. These banks operate in an environment characterized by Sharia law and low levels of investor protection. I expect that in Arab countries, financial institutions have more potential to exploit the minority shareholders by using the dividend policy. I also expect that within the framework of agency theory, both types of banks set their dividend policies differently.By using the dynamic partial adjustment dividend model for the period 2003-2012, I find that both types of banks follow stable dividend policies having the similar speed of adjustment coefficients. However, conventional banks have relatively more stable and less responsive dividend policies to the changes of earnings. Contrary to the agency theory predictions of higher actual and target dividend payout ratios for Islamic banks, both ratios are substantially lower. Islamic banks in these markets have relatively more willing to payout less dividends and use free cash flow for their personal benefits. In contrast, conventional banks experience relatively less significant agency problems and have more willing to payout higher dividends.The empirical results also show that in an environment characterized by Sharia law and low levels of investor protection, Islamic and conventional banks set their dividend policies in line with substitute and outcome agency model of dividends, respectively. Islamic banks payout lower dividends and use the dividend policy as a substitute mechanism for alleviating relatively more significant agency problems. Subiv classification index results show that Islamic banks increase dividends in response to weak minority investor protection, specifically the inability of shareholders to get corporate documents during litigation against firms. In these markets, conventional banks payout higher dividends as an outcome of strong protection for shareholder rights. Sub-classification index results show that conventional banks increase dividends in response to stronger minority investor protection, specifically for the director liability and the amount of disclosure of related party transactions.

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“…On the other hand, John and Knyazeva (2006) in their study reported that total dividend payouts are significantly higher in countries with weak internal and external governance mechanisms. They interpret this finding as cash payment can be used as a device to provide the commitment of minority shareholders in countries with weak legal protection.…”

Section: Literature Reviewmentioning

confidence: 85%

“…As John and Knyazeva (2006) state, dividends are effective mechanisms at mitigating the agency costs of free cash flow due to their pre-commitment nature and and higher costs of deviations from the dividend policy given the negative market reaction to dividend cuts. Companies with weak corporate governance are generally more exposed to managerial entrenchment and anticipate a more serious cash flow problem.…”

Section: Literature Reviewmentioning

confidence: 99%

Corporate Governance and Dividend Policy : An Empirical Analysis From Borsa Istanbul Corporate Governance Index (XKURY)

Aydin¹,

Cavdar²

2015

AFR

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The aim of this research is to analyze the potential relationship between corporate governance and dividend policy. To conduct this research, a sample of 19 corporations from the Borsa Istanbul (BIST) Corporate Governance Index (XKURY), which is composed of listed companies who accomplished a certain level of Corporate Governance Principles over the period of 2007-2014, were selected. OLS (Ordinary Least Squares) panel regression analysis has been performed. The potential relationship between ownership structure and dividend policy has also been analyzed by utilizing the independent variables of ownership concentration, managerial ownership and total foreign ownership. In addition to our independent variables, we also included return on equity (ROE) and firm size to our research in order to increase the explanatory power of our model. This study finds an insignificant relationship between corporate governance and dividend policy. On the other hand, we obtained significant positive relationship between total foreign ownership and dividend policy and significant negative relationships between ownership concentration and dividend policy and managerial ownership and dividend policy. Finally, we obtained significant negative association between return on equity (ROE) and dividend policy and significant positive association between firm size and dividend policy.

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Payout Policy, Agency Conflicts, and Corporate Governance

Cited by 145 publications

References 13 publications

Corporate governance and dividend pay-out policy in UK listed SMEs

Corporate governance and dividend pay-out policy in UK listed SMEs

Investor protection and dividend policy: The case of Islamic and conventional banks

Corporate Governance and Dividend Policy : An Empirical Analysis From Borsa Istanbul Corporate Governance Index (XKURY)

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