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Does foreign currency-denominated debt affect dividend payout policy? Evidence from Korea

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  • Choi, Young Mok
  • Park, Kunsu

Abstract

This study examines the effect of foreign currency-denominated debt on dividend payouts in the context of risk hedging and debt financing costs. We find that firms with a higher proportion of foreign currency debt are more likely to pay dividends; furthermore, we also find that these firms pay higher dividends. We further find that the positive relation between the proportion of foreign currency debt and dividend payouts is more pronounced in firms with lower credit risk and cash flows than their counterparts. Our results are robust to alternative estimation methods, endogeneity concerns, and alternative proxies for foreign currency debt and dividend payouts.

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  • Choi, Young Mok & Park, Kunsu, 2019. "Does foreign currency-denominated debt affect dividend payout policy? Evidence from Korea," Journal of Multinational Financial Management, Elsevier, vol. 49(C), pages 20-34.
    • Handle: RePEc:eee:mulfin:v:49:y:2019:i:c:p:20-34
    DOI: 10.1016/j.mulfin.2019.02.001
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    Cited by:

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    More about this item

    Keywords

    Foreign currency-denominated debt; Dividend policy; Hedging; Debt financing costs;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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