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Do Shareholders Fight for Firm Value or Market Value in Emerging Markets? The Mediating Effect of Board Structure Dynamics on Dividend Policy Decision

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  • Daniel Ofori‐Sasu
  • Joshua Yindenaba Abor
  • Sydney Quaye

Abstract

The paper examines the mediating effect of board structure dynamics on the relationship between dividend payout and shareholders’ wealth at the firm level and market level. Panel regression models are used by applying data from 27 listed firms in Ghana between 2010 and 2017. We find that board structure dynamics have a direct effect on shareholders’ wealth at both levels. However, the results reveal new evidence that board structure dynamics play a mediating role on the relationship between dividend policy decision and shareholders’ wealth only at the market level. We find that independent directors and CEO duality significantly reduce market value of shareholders through dividend payout decision. However, independent directors and longer CEO tenure in office mediate a positive effect on the relationship between dividend policy and shareholders’ wealth at the market level. Thus, the mediating effect of board structure dynamics, particularly independent directors and CEO tenure, are important in predicting a positive relationship between dividend policy and shareholders’ wealth at the market level than at the firm level. Therefore, regulatory bodies and investors should provide strong board structure dynamics that serve as a mediating mechanism for prudent dividend policy decisions that add value to shareholders’ wealth.

Suggested Citation

  • Daniel Ofori‐Sasu & Joshua Yindenaba Abor & Sydney Quaye, 2019. "Do Shareholders Fight for Firm Value or Market Value in Emerging Markets? The Mediating Effect of Board Structure Dynamics on Dividend Policy Decision," African Development Review, African Development Bank, vol. 31(4), pages 409-422, December.
    • Handle: RePEc:bla:afrdev:v:31:y:2019:i:4:p:409-422
    DOI: 10.1111/1467-8268.12401
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    Cited by:

    1. Jonas Ladime & Rayenda Khresna Brahmana, 2021. "Role of controlling shareholders on the performance of efficient African banks," African Development Review, African Development Bank, vol. 33(2), pages 316-328, June.

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