Journal article
Does political economy reduce agency costs? Some evidence from dividend policies around the world
Journal of Empirical Finance, Vol.18(1), pp.16-35
2011
Abstract
This study shows that firms in proportional-electoral countries pay out lower dividends and that the correlation between a firm's growth potential and dividend payout ratio is weaker in proportional-electoral countries. However, firms in proportional-electoral countries that cross-list in majoritarian system countries, tend to pay out higher dividends and the negative relation between growth potential and dividend payout tend to be stronger than their peers that do not cross-list. For a few countries that changed their electoral system towards a more proportional system, we observe a decrease in dividend payout ratio and a weaker relation between growth and dividends after the change. Overall these results indicate that a country's political system affects the severity of agency problems. Further, the effect of legal origin on dividend policy reverses once we include the political economy variables in the regressions. We also document that the electoral system not only affects the amount of dividends paid by a firm but also the form of payment.
Details
- Title
- Does political economy reduce agency costs? Some evidence from dividend policies around the world
- Authors
- HiuLam Choy (Author) - Drexel UniversityFerdinand A. Gul (Author) - Monash University MalaysiaJun Yao (Author) - Hong Kong Polytechnic University
- Publication details
- Journal of Empirical Finance, Vol.18(1), pp.16-35
- Publisher
- Elsevier BV
- DOI
- 10.1016/j.jempfin.2010.10.001
- ISSN
- 1879-1727
- Organisation Unit
- University of the Sunshine Coast, Queensland; School of Business and Creative Industries
- Language
- English
- Record Identifier
- 99678895102621
- Output Type
- Journal article
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