Financial reporting quality and dividend policy: New evidence from an international level

Quoc Dat Trinh, Christian Haddad and Kim Thuan Tran

International Review of Financial Analysis, 2022, vol. 80, issue C

Abstract: This study examines the link between financial reporting quality and dividend payout across 76 countries. We find that financial reporting quality increases dividend payout after controlling for firm and country specifics. We also investigate different channels that moderate the relation between financial reporting quality and dividend payout. We find that the positive association between high-quality financial reporting and dividend payout is more pronounced when firms have free cash flow problems, face severe information asymmetry, and are located in countries with weaker minority shareholder protection rights. Interestingly, we find evidence that high reporting quality enhances firms' payment of dividend even when these firms already overpaying their shareholders. However, the relation becomes weaker when firms overpass the optimal level of dividend payout. The findings remain consistent after several robustness checks, thus highlighting the effectiveness of more transparent disclosure of financial information in reducing information asymmetry related to firms' internal agency costs and their relationships with external parties.

Keywords: Financial reporting quality; Dividend policy; Regulations (search for similar items in EconPapers)
JEL-codes: G32 G38 O10 O16 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:80:y:2022:i:c:s1057521922000060

DOI: 10.1016/j.irfa.2022.102026

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