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Board Reforms and Dividend Policy: International Evidence

Published online by Cambridge University Press:  05 August 2020

Kee-Hong Bae Open the ORCID record for Kee-Hong Bae [Opens in a new window] ,
Sadok El Ghoul ,
Omrane Guedhami  and
Xiaolan Zheng
Kee-Hong Bae*
Affiliation:
York University Schulich School of Business kbae@schulich.yorku.ca
Sadok El Ghoul
Affiliation:
University of Alberta Campus Saint-Jean elghoul@ualberta.ca
Omrane Guedhami
Affiliation:
University of South Carolina Moore School of Business omrane.guedhami@moore.sc.edu
Xiaolan Zheng
Affiliation:
Nottingham University Business School China xiaolan.zheng@nottingham.edu.cn
*
kbae@schulich.yorku.ca (corresponding author)
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Abstract

We study the impact of board reforms implemented in 40 countries worldwide on corporate dividend policy. Using a difference-in-differences analysis, we find that firms pay higher dividends following the reforms. The increase in dividend payouts is more pronounced for firms with weak board governance in the pre-reform period and those in countries with strong external governance mechanisms. Our findings corroborate the dividend outcome model, which postulates that board reforms strengthen the monitoring role of the board and empower outside shareholders to force management to disgorge dividends.

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Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 4 , June 2021 , pp. 1296 - 1320
Copyright
© THE AUTHOR(S), 2020. PUBLISHED BY CAMBRIDGE UNIVERSITY PRESS ON BEHALF OF THE MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF WASHINGTON

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Footnotes

We are grateful for comments from an anonymous reviewer, Narjess Boubakri, Ruiyuan Chen, Wolfgang Drobetz, Sattar Mansi, Mark Mulcahy, Xinming Li, He Wang, Ying Zheng, and participants at the 2019 Financial Management Association Meeting. El Ghoul appreciates the generous financial support from Canada’s Social Sciences and Humanities Research Council (Grant 435-2017-1223). Any errors are our own.

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