Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/8248
Title: Does political economy reduce agency costs? Some evidence from dividend policies around the world
Authors: Choy, H
Gul, FA
Yao, J 
Keywords: Dividend
Investor protection
Legal protection
Political economy
Issue Date: 2011
Publisher: North-Holland
Source: Journal of empirical Finance, 2011, v. 18, no. 1, p. 16-35 How to cite?
Journal: Journal of empirical finance 
Abstract: This study shows that firms in proportional-electoral countries pay out lower dividends and that the correlation between a firm's growth potential and dividend payout ratio is weaker in proportional-electoral countries. However, firms in proportional-electoral countries that cross-list in majoritarian system countries, tend to pay out higher dividends and the negative relation between growth potential and dividend payout tend to be stronger than their peers that do not cross-list. For a few countries that changed their electoral system towards a more proportional system, we observe a decrease in dividend payout ratio and a weaker relation between growth and dividends after the change. Overall these results indicate that a country's political system affects the severity of agency problems. Further, the effect of legal origin on dividend policy reverses once we include the political economy variables in the regressions. We also document that the electoral system not only affects the amount of dividends paid by a firm but also the form of payment.
URI: http://hdl.handle.net/10397/8248
ISSN: 0927-5398
DOI: 10.1016/j.jempfin.2010.10.001
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