Government Ownership and Dividend Policy: Evidence from Newly Privatised Firms

Hamdi Ben-Nasr

Journal of Business Finance & Accounting, 2015, vol. 42, issue 5-6, 665-704

Abstract: In this paper we examine the relationship between government ownership and dividend policy. Using a multinational sample of newly privatised firms from 43 countries, we find strong and robust evidence indicating that dividend payout is negatively related to government ownership, consistent with the predictions of agency theory. We also find that country-level corporate governance affects the relationship between government ownership and dividend policy. Specifically, the adverse effects of government ownership on dividend policy are more pronounced in countries with weak law and order and a lower level of checks and balances. Our results are important, as they show that government ownership, as well as the institutional environment, does in fact affect the critical corporate policies, such as dividend policy, of newly privatised firms.

Date: 2015
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