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Role of corporate governance and lifecycle in determining payout precommitment in an emerging economy

Author

Listed:
  • Thomas J.Flavin

    (Department of Economics Finance and Accounting, National University of Ireland, Maynooth)

  • Abhinav Goyal

    (Cork University Business School, University College Cork, Cork, Ireland)

  • Thomas O'Connor

    (Department of Economics Finance and Accounting, National University of Ireland, Maynooth)

Abstract

We analyze the role of firm-level corporate governance in determining the precommitment payout policy of emerging market firms and investigate if there is a precommitment lifecycle effect. Unlike previous studies for the U.S. firms, we only find evidence of precommitment among relatively well-governed firms, who combine good governance with large dividend payouts to shareholders and large debt-related repayments to creditors. We also document a strong precommitment lifecycle effect. Firms in the growth and mature stages of their lifecycle tend to use both debt and dividends to precommit to investors, with an increasing proportion of dividends in total payout measures. Our results are robust to an array of control variables, alternate payout proxies, firm-level corporate governance and addresses any potential endogeneity concerns in the sample.

Suggested Citation

  • 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.
    • Handle: RePEc:may:mayecw:n297-20.pdf
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    File URL: http://repec.maynoothuniversity.ie/mayecw-files/N297-20.pdf
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    More about this item

    Keywords

    : Precommitment payout; corporate governance; lifecycle effects; emerging market.;
    All these keywords.

    JEL classification:

    • 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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