Payout policy and the interaction of firm-level and country-level governance

Richard Herron ()
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Richard Herron: Northeastern University

Review of Quantitative Finance and Accounting, 2022, vol. 58, issue 1, No 1, 39 pages

Abstract: Abstract For a panel of 1880 firms across 21 countries from 2004 to 2008, the impact of firm-level and country-level governance on payout policy is consistent with the La Porta et al. (J Finance 60(1):1–33, 2000) outcome model. In weak legal regimes, dividends increase in firm-level governance. In strong legal regimes, dividends decrease in firm-level governance while share repurchases increase, substituting tax-efficient, flexible share repurchases for rigid dividends. Consistent with the outcome model, payout decreases in growth opportunities when firm-level and country-level governance are high. These results are robust to an instrumental variable approach and alternative firm-level and country-level governance measures.

Keywords: Payout policy; Corporate governance; International financial markets (search for similar items in EconPapers)
JEL-codes: G15 G34 G35 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11156-021-00986-1

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