Corporate governance and dividend strategy: lessons from Australia
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Purpose – The purpose of this paper is to empirically investigate the effects of corporate governance on the dividend payout (DP) in Australia where DP remains high and corporate governance system has recently been strengthened. Design/methodology/approach – A self-constructed governance indexes over 2001-2013 is used for the random effect panel Tobit model to investigate the effect of corporate governance on cash dividend. Two different versions of the indexes and the traditionally emphasized governance elements such as board structure are also used for the robustness checks. Findings – Estimation results report that a positive effect of governance, combined with size of firm and profitability, on DPs. In contrast, financial distress and the global financial crisis, respectively, have negative effect on dividend policy. Further examinations imply that the positive effect of governance is attenuated by growth opportunities while intensified by firm free cash flow and the franked dividend policy. Originality/value – The sample period and the governance indexes in this paper, respectively, are the longest and the most comprehensive among existing studies on Australian case. This paper also combined the traditional governance-dividend theme with corporate tax, particularly the unique franked dividend tax system.
International Journal of Managerial Finance
© 2016 Emerald. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Banking, Finance and Investment not elsewhere classified