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Cash dividends and investor protection in Asia

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  • Goyal, Abhinav
  • Muckley, Cal

Abstract

We study the importance of investor rights in payout policy determination in Asia, using a sample of up to 52,778 firm years. The listed Asian firms located in relatively high investor protection, common law countries, have a greater tendency to payout and, if they do so, they tend to pay out more. We also examine the importance of distinctive creditor and minority shareholder rights in respect to payout policy determination. In our study of a variety of payout events (decisions to pay out, to initiate or omit payout and to markedly increase or decrease payout), we show that this set of payout events is principally determined by competing creditor and minority shareholder rights, rather than managerial sought reputation related effects, to diminish the cost of capital. Our findings indicate that creditors exert significant and far reaching influence over corporate payout policy decision-making, however, the importance of the agency costs of equity predominates.

Suggested Citation

  • Goyal, Abhinav & Muckley, Cal, 2013. "Cash dividends and investor protection in Asia," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 31-43.
    • Handle: RePEc:eee:finana:v:29:y:2013:i:c:p:31-43
    DOI: 10.1016/j.irfa.2013.03.009
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    8. Al-Malkawi, Husam-Aldin Nizar & Ishaq Bhatti, M., 2020. "Are tests of dividend policy robust to estimation techniques: The case of an emerging economy?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 541(C).
    9. Zijian Cheng & Charles P. Cullinan & Zhangxin (Frank) Liu & Junrui Zhang, 2021. "Cross‐listings and dividend size and stability: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 415-465, March.
    10. López-Iturriaga, Félix J. & Santana Martín, Domingo Javier, 2019. "The payout policy of politically connected firms: Tunnelling or reputation?," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    11. Booth, Laurence & Zhou, Jun, 2017. "Dividend policy: A selective review of results from around the world," Global Finance Journal, Elsevier, vol. 34(C), pages 1-15.
    12. Duygun, Meryem & Guney, Yilmaz & Moin, Abdul, 2018. "Dividend policy of Indonesian listed firms: The role of families and the state," Economic Modelling, Elsevier, vol. 75(C), pages 336-354.
    13. Seyed Alireza Athari & Mahboubeh Bahreini, 2023. "The impact of external governance and regulatory settings on the profitability of Islamic banks: Evidence from Arab markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2124-2147, April.
    14. Thomas J.Flavin & Abhinav Goyal & Thomas O'Connor, 2020. "Role of corporate governance and lifecycle in determining payout precommitment in an emerging economy," Economics Department Working Paper Series n297-20.pdf, Department of Economics, National University of Ireland - Maynooth.
    15. Braun, Matías & Rubio, Germán & Tigero, Tamara, 2023. "Payout policy around the world," International Review of Financial Analysis, Elsevier, vol. 89(C).
    16. Powell Gian Hartono & Robiyanto Robiyanto, 2023. "Factors affecting the inconsistency of dividend policy using dynamic panel data model," SN Business & Economics, Springer, vol. 3(2), pages 1-21, February.
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    18. Xiaoting Wei & Cameron Truong & Viet Do, 2020. "When are dividend increases bad for corporate bonds?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1295-1326, June.
    19. Thitima Sitthipongpanich, 2016. "The influence of the CEO and the largest shareholder on dividend payout policy in Thailand," Proceedings of Business and Management Conferences 3405493, International Institute of Social and Economic Sciences.
    20. Sangapta Damarjati Purba & Tastaftiyan Risfandy & Muizzuddin Muizzuddin & Muh. Rudi Nugroho, 2022. "Foreign institutional investors and dividend policy in Indonesia," Journal of Asset Management, Palgrave Macmillan, vol. 23(3), pages 235-245, May.
    21. Anwer, Zaheer & Mohamad, Shamsher & Paltrinieri, Andrea & Hassan, M. Kabir, 2021. "Dividend payout policy of Shariah compliant firms: Evidence from United States," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    22. Thomas Flavin & Abhinav Goyal & Thomas O'Connor, 2021. "Corporate governance, life cycle, and payout precommitment: An emerging market study," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(1), pages 179-209, April.
    23. von Eije, Henk & Goyal, Abhinav & Muckley, Cal B., 2017. "Flexible firm-level dividends in Latin America," Finance Research Letters, Elsevier, vol. 23(C), pages 133-136.

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    More about this item

    Keywords

    Payout policy; Dividends; Share repurchases; International financial markets;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • 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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