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Disclosure Quality and Dividend Payout in Saudi Firms

Rashidah Abdul Rahman, Eman Saleh Fadel, NajlaAbdul Rahman and Amal Awad

International Business Research, 2019, vol. 12, issue 1, 16-26

Abstract: This study examines how disclosure quality influences the dividend payouts of firms, and provides further evidence concerning the outcome hypothesis and substitution hypothesis. Using a sample of non-financial Saudi Arabian listed firms during 2012-2014, our results provide support for the substitution hypothesis in which outsiders demand higher dividends in a low-quality disclosure environment as a “substitute” for opacity. Further analysis shows that managers pay a higher dividend in an opaque environment not only to establish a reputation among outside capital suppliers but also because they have to disgorge excess cash to circumvent free cash flow problems.

Keywords: voluntary disclosure; dividend payout; Saudi Arabia (search for similar items in EconPapers)
JEL-codes: C33 F31 F41 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:ibn:ibrjnl:v:12:y:2019:i:1:p:16-26