Board Reforms and Dividend Policy: International Evidence

We study the impact of board reforms implemented in 40 countries worldwide on corporate dividend policy. Using a difference-in-differences analysis, we find that firms pay higher dividends following the reforms. The increase in dividend payouts is more pronounced for firms with weak board governance...

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Bibliographic Details
Published inJournal of financial and quantitative analysis Vol. 56; no. 4; pp. 1296 - 1320
Main Authors Bae, Kee-Hong, El Ghoul, Sadok, Guedhami, Omrane, Zheng, Xiaolan
Format Journal Article
LanguageEnglish
Published New York, USA Cambridge University Press 01.06.2021
Subjects
Boards of directors
Chief executive officers
Corporate governance
Dividend policy
Dividends
Governance
Investments
Quantitative analysis
Reforms
Stockholders
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Summary:We study the impact of board reforms implemented in 40 countries worldwide on corporate dividend policy. Using a difference-in-differences analysis, we find that firms pay higher dividends following the reforms. The increase in dividend payouts is more pronounced for firms with weak board governance in the pre-reform period and those in countries with strong external governance mechanisms. Our findings corroborate the dividend outcome model, which postulates that board reforms strengthen the monitoring role of the board and empower outside shareholders to force management to disgorge dividends.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109020000319