Cash dividends and investor protection in Asia

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Goyal, Abhinav
Muckley, Cal B.
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We study the importance of investor rights in payout policy determination in Asia, using a sample of up to 52,778 firm years. The listed Asian firms located in relatively high investor protection, common law countries, have a greater tendency to payout and, if they do so, they tend to pay out more. We also examine the importance of distinctive creditor and minority shareholder rights in respect to payout policy determination. In our study of a variety of payout events (decisions to pay out, to initiate or omit payout and to markedly increase or decrease payout), we show that this set of payout events is principally determined by competing creditor and minority shareholder rights, rather than managerial sought reputation related effects, to diminish the cost of capital. Our findings indicate that creditors exert significant and far reaching influence over corporate payout policy decision-making, however, the importance of the agency costs of equity predominates.
Dividends , International financial markets , Payout policy , Share repurchases
Goyal, A. and Muckley, C. (2013) 'Cash dividends and investor protection in Asia', International Review of Financial Analysis, 29, pp. 31-43. doi: 10.1016/j.irfa.2013.03.009