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Analysis Of The Relationship Between Disclosure Quality And Dividend Payouts From The Agency Theory Perspective

Author

Listed:
  • LIN, Dan

    (Takming University of Science and Technology, Taiwan)

  • KUO, Hsien-Chang

    (Shih Chien University, Taiwan)

  • WANG, Lie-Huey

    (Ming Chuan University, Taiwan)

Abstract

This study examines the effect of disclosure quality on dividend policy when the level of agency problem is taken into account and empirically tests the outcome and substitution hypotheses.We find evidence consistent with the outcome hypothesis; that is, disclosure quality is positively related to dividend payouts. In addition, high agency cost firms with better disclosure quality are associated with a stronger propensity to pay dividends and larger payouts. The results highlight the important governance role of disclosure quality. This study shows that despite the high agency cost problem, so long as there is high disclosure quality, shareholders can safeguard their interests by demanding higher dividends payouts.

Suggested Citation

  • LIN, Dan & KUO, Hsien-Chang & WANG, Lie-Huey, 2016. "Analysis Of The Relationship Between Disclosure Quality And Dividend Payouts From The Agency Theory Perspective," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 20(1), pages 6-20.
  • Handle: RePEc:vls:finstu:v:20:y:2016:i:1:p:6-20
    as

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    References listed on IDEAS

    as
    1. Bradford, William & Chen, Chao & Zhu, Song, 2013. "Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 445-464.
    2. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, February.
    3. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    4. repec:hrv:faseco:30747163 is not listed on IDEAS
    5. Gareth Campbell & John D. Turner, 2011. "Substitutes for legal protection: corporate governance and dividends in Victorian Britain," Economic History Review, Economic History Society, vol. 64(2), pages 571-597, May.
    6. Chau, Gerald K. & Gray, Sidney J., 2002. "Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore," The International Journal of Accounting, Elsevier, vol. 37(2), pages 247-265.
    7. Chae, Joon & Kim, Sungmin & Lee, Eun Jung, 2009. "How corporate governance affects payout policy under agency problems and external financing constraints," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2093-2101, November.
    8. Oskar Kowalewski & Ivan Stetsyuk & Oleksandr Talavera, 2008. "Does corporate governance determine dividend payouts in Poland?," Post-Communist Economies, Taylor & Francis Journals, vol. 20(2), pages 203-218.
    9. Hwang, Lee-Seok & Kim, Hakkon & Park, Kwangwoo & Park, Rae Soo, 2013. "Corporate governance and payout policy: Evidence from Korean business groups," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 179-198.
    10. Lukas Setia-Atmaja & George A. Tanewski & Michael Skully, 2009. "The Role of Dividends, Debt and Board Structure in the Governance of Family Controlled Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(7-8), pages 863-898.
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    More about this item

    Keywords

    dividend policy; disclosure quality; agency theory; corporate governance;

    JEL classification:

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

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