Political freedom and corporate payouts

Omrane Guedhami, Chuck C.Y. Kwok and Liang Shao

Journal of Corporate Finance, 2017, vol. 43, issue C, 514-529

Abstract: We study the effect of a country's political freedom status on corporate payouts around the world. In both OLS and two-stage regressions, we find that firms in less free countries pay out more cash, suggesting that low political freedom is associated with a less friendly investment environment. Consistent with this view, we further find that firms reduce payouts when a country's political freedom status improves, while they tend to pay out past excess cash and cut future investment in the face of a deterioration in political freedom. In additional analysis, we also find that firms in less free countries do not pay out cash mainly to ease agency concerns: cash payouts in these countries are more volatile and hence less valuable.

Keywords: Political institutions; Freedom; Payout policy (search for similar items in EconPapers)
JEL-codes: G35 P16 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:43:y:2017:i:c:p:514-529

DOI: 10.1016/j.jcorpfin.2017.02.002

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