Do non-financial factors influence corporate dividend policies? Evidence from business strategy

Zhangfan Cao, Steven Xianglong Chen, Mostafa Harakeh and Edward Lee

International Review of Financial Analysis, 2022, vol. 82, issue C

Abstract: In this paper, we examine the influence of business strategy on dividend policy. We find that firms following an innovation-oriented strategy (prospectors) pay significantly lower dividends than those following an efficiency-oriented strategy (defenders). Our cross-sectional analyses show that such association is more pronounced among firms with greater investment opportunities and superior performance. Further analysis reveals that prospectors make significantly more capital investment, consistent with prospectors paying fewer dividends to finance their investment activities. Moreover, we address potential endogeneity concerns by implementing (i) a triple-difference analysis (DiDiD) that exploits an exogenous shock that hinders innovation through curbing the supply of highly skilled employees and (ii) an instrumental variable approach. Our results are robust to a propensity-score-matched (PSM) analysis, the inclusion of individual business strategy components, and the use of alternative measures of the dependent variables. Overall, our findings highlight business strategy as an inherent and non-financial determinant of dividend policies.

Keywords: Business strategy; Dividend payout; Capital investment; Talent mobility (search for similar items in EconPapers)
JEL-codes: G30 G35 J60 L10 O34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521922001727
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001727

DOI: 10.1016/j.irfa.2022.102211

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().