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Dividend policy and the takeover market: Half a century of evidence

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  • Chintrakarn, Pandej
  • Chatjuthamard, Pattanaporn
  • Jiraporn, Pornsit
  • Kyaw, Khine

Abstract

We study the effect of a key external governance mechanism – the takeover market – on dividend policy. We employ a unique measure to assess vulnerability to corporate takeovers derived from the varied enactment of legislation across different states. Using an extensive dataset spanning half a century and all state regulations, we demonstrate that firms more susceptible to takeover threats pay significantly higher dividends. Our results support agency theory, which postulates that the takeover market compels self-serving managers to return more cash to shareholders through higher dividends.

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  • Chintrakarn, Pandej & Chatjuthamard, Pattanaporn & Jiraporn, Pornsit & Kyaw, Khine, 2025. "Dividend policy and the takeover market: Half a century of evidence," Research in International Business and Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:riibaf:v:75:y:2025:i:c:s0275531925000303
    DOI: 10.1016/j.ribaf.2025.102774
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    Keywords

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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