File(s) under permanent embargo
Does political economy reduce agency costs? Some evidence from dividend policies around the world
journal contribution
posted on 2011-01-01, 00:00 authored by H L Choy, Ferdinand GulFerdinand Gul, Jun YaoJun YaoThis 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. © 2010 Elsevier B.V.
History
Journal
Journal of Empirical FinanceVolume
18Issue
1Pagination
16 - 35Publisher DOI
ISSN
0927-5398Publication classification
C1.1 Refereed article in a scholarly journal; C Journal articleCopyright notice
2011, ElsevierUsage metrics
Categories
No categories selectedKeywords
Licence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC