Economics at your fingertips  

Corporate Governance and Dividend Policy: Shareholders' Protection or Expropriation?

Fodil Adjaoud and Walid Ben-Amar

Journal of Business Finance & Accounting, 2010, vol. 37, issue 5-6, 648-667

Abstract: We investigate the relationship between corporate governance quality and dividend policy in Canada. Based on the agency theory predictions, we consider the effect of two conflicting hypotheses about the effect of corporate governance on dividend payouts: the outcome and substitution hypotheses. The effectiveness of firm-level governance mechanisms is assessed through the "Globe" & "Mail" annual corporate governance index and four sub-categories scores (board composition, shareholding and compensation issues, shareholder rights issues and corporate governance disclosure policy). Using a sample of 714 firm-years listed on the Toronto Stock Exchange over the period 2002-2005, our results show that firms with stronger corporate governance have higher dividend payouts. Among the four components of the corporate governance index, we document that board composition and shareholder rights' policy are positively related to payout ratios. We also find a positive association between firm size, the level of free cash flows and dividend payouts. Finally, we document a negative relationship between firm risk, US cross-listing and dividend payouts. Taken together our results are consistent with the outcome model of dividend policy. Copyright (c) 2010 Blackwell Publishing Ltd.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25) Track citations by RSS feed

Downloads: (external link) link to full text (text/html)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X

Access Statistics for this article

Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker

More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2019-12-10
Handle: RePEc:bla:jbfnac:v:37:y:2010-06:i:5-6:p:648-667