Does geography matter? Firm location and corporate payout policy

Kose John, Anzhela Knyazeva and Diana Knyazeva

Journal of Financial Economics, 2011, vol. 101, issue 3, 533-551

Abstract: We investigate the impact of geography on agency costs and firm dividend policies. We argue that remote firm location increases the cost of shareholder oversight of managerial investment decisions. We hypothesize that remotely located firms facing free cash flow problems precommit to higher dividends to mitigate agency conflicts. We find that remotely located firms pay higher dividends. As expected, the effect of geography on dividends is most pronounced for firms with severe free cash flow problems. Further, remotely located firms rely more on regular dividends instead of special dividends or share repurchases and decrease dividends less often.

Keywords: Geography; Firm; location; Proximity; to; shareholders; Dividends; Payout; policy (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (150)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:101:y:2011:i:3:p:533-551

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