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Foreign Investors and the Peer Effects to Payout Policies

Author

Listed:
  • Lee Jong Hwa

    (Department of Finance, Dong-A University, 225, Gudeok-ro, Seo-gu, Busan, 49236, Republic of Korea)

  • Seo Sung Won

    (Department of Business Administration, Konkuk University, Gwangjin‐gu, Seoul, Republic of Korea)

Abstract

This research studies the influence of foreign investors on payout policies and the peer effect of dividends. We show that peer effects on dividend policies exist in Korea using an instrumental variable approach. Additionally, our results suggest that foreign investor activities intensify the peer effect on dividend policies. Firms with a higher net purchase by foreign investors are more heavily scrutinized to reduce information asymmetry between managers and shareholders. This monitoring behavior affects dividend choices among firms and the responsiveness to peer influence. Further, the impact of foreign investors is prominent for dividend increases but not for decreases.

Suggested Citation

  • Lee Jong Hwa & Seo Sung Won, 2023. "Foreign Investors and the Peer Effects to Payout Policies," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 17(1), pages 1-14.
    • Handle: RePEc:bpj:econoa:v:17:y:2023:i:1:p:14:n:1008
    DOI: 10.1515/econ-2022-0041
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    References listed on IDEAS

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    More about this item

    Keywords

    peer effect; foreign investors; dividend policy; payout decision; international finance;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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