IDEAS home Printed from https://ideas.repec.org/a/ids/ijcgov/v3y2012i2-3-4p126-142.html
   My bibliography  Save this article

Trade-off between agency problem and growth opportunity on dividend payout policy under product market competition

Author

Listed:
  • Sue-Fung Wang
  • Meng-Shiang Chiu

Abstract

This paper investigates whether or not product market competition affects payout policy. According to literature, issues related to dividend payout policy comprise two competing hypotheses, namely, the maturity hypothesis and the free cash flow hypothesis. The former argues that growth opportunity and dividend payout have a negative relationship, whereas the latter argues that firms tend to increase dividend payouts in order to weaken agency problems. Existing studies seldom discuss the issue in which dividend payout policy faces the trade-off between growth opportunity and agency problem in different levels of product market competition. Therefore, employing regression analysis, we explored the current issue with US manufacturing firms as samples. The firms show the tendency to retain more cash to expand their growth opportunities and decide to pay fewer dividends in less-concentrated industries. Therefore, the dividend policy of firms is consistent with the maturity hypothesis in less-concentrated industries.

Suggested Citation

  • Sue-Fung Wang & Meng-Shiang Chiu, 2012. "Trade-off between agency problem and growth opportunity on dividend payout policy under product market competition," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 3(2/3/4), pages 126-142.
    • Handle: RePEc:ids:ijcgov:v:3:y:2012:i:2/3/4:p:126-142
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=51854
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sultan Sikandar Mirza & Muhammad Ansar Majeed & Tanveer Ahsan, 2020. "Board gender diversity, competitive pressure and investment efficiency in Chinese private firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 417-440, September.
    2. Sultan Sikandar Mirza & Muhammad Ansar Majeed & Tanveer Ahsan, 2020. "Board gender diversity, competitive pressure and investment efficiency in Chinese private firms," Post-Print hal-02956320, HAL.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijcgov:v:3:y:2012:i:2/3/4:p:126-142. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=260 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.