Dividend policy and the takeover market: Half a century of evidence

Pandej Chintrakarn, Pattanaporn Chatjuthamard, Pornsit Jiraporn and Khine Kyaw

Research in International Business and Finance, 2025, vol. 75, issue C

Abstract: We study the effect of a key external governance mechanism – the takeover market – on dividend policy. We employ a unique measure to assess vulnerability to corporate takeovers derived from the varied enactment of legislation across different states. Using an extensive dataset spanning half a century and all state regulations, we demonstrate that firms more susceptible to takeover threats pay significantly higher dividends. Our results support agency theory, which postulates that the takeover market compels self-serving managers to return more cash to shareholders through higher dividends.

Keywords: dividends; dividend policy; takeover market; corporate governance (search for similar items in EconPapers)
JEL-codes: G34 G35 G38 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:75:y:2025:i:c:s0275531925000303

DOI: 10.1016/j.ribaf.2025.102774

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