Mandatory dividend rules and the investment decision: The case of Chile

Rodrigo Saens () and Tamara Tigero

The North American Journal of Economics and Finance, 2021, vol. 56, issue C

Abstract: Chilean companies are forced by law to distribute at least 30% of their liquid profits. The purpose of this paper is to analyze whether this mandatory dividend rule has an impact on investment decisions. Based on accounting data and by using the discontinuous regression approach, our results show that there are no significant differences between the investment plans of Chilean companies that pay dividends and those that do not. Moreover, consistent with the signaling hypothesis, our results also show that firms with a greater probability of paying an excess dividend (above the minimum required by the law) are those with more investment opportunities and more financial constraints.

Keywords: Mandatory dividend rules; Investment decisions; Minority shareholders' rights (search for similar items in EconPapers)
JEL-codes: G32 G35 G39 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:56:y:2021:i:c:s1062940821000139

DOI: 10.1016/j.najef.2021.101373

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