ANALYSIS OF THE RELATIONSHIP BETWEEN DISCLOSURE QUALITY AND DIVIDEND PAYOUTS FROM THE AGENCY THEORY PERSPECTIVE

Dan Lin, Hsien-Chang Kuo and Lie-Huey Wang
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Dan Lin: Takming University of Science and Technology, Taiwan
Hsien-Chang Kuo: Shih Chien University, Taiwan
Lie-Huey Wang: Ming Chuan University, Taiwan

Studii Financiare (Financial Studies), 2016, vol. 20, issue 1, 6-20

Abstract: This study examines the effect of disclosure quality on dividend policy when the level of agency problem is taken into account and empirically tests the outcome and substitution hypotheses.We find evidence consistent with the outcome hypothesis; that is, disclosure quality is positively related to dividend payouts. In addition, high agency cost firms with better disclosure quality are associated with a stronger propensity to pay dividends and larger payouts. The results highlight the important governance role of disclosure quality. This study shows that despite the high agency cost problem, so long as there is high disclosure quality, shareholders can safeguard their interests by demanding higher dividends payouts.

Keywords: dividend policy; disclosure quality; agency theory; corporate governance (search for similar items in EconPapers)
JEL-codes: G34 G35 (search for similar items in EconPapers)
Date: 2016
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