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Board Reforms and Dividend Policy: International Evidence

Author

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  • Bae, Kee-Hong
  • El Ghoul, Sadok
  • Guedhami, Omrane
  • Zheng, Xiaolan

Abstract

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.

Suggested Citation

  • Bae, Kee-Hong & El Ghoul, Sadok & Guedhami, Omrane & Zheng, Xiaolan, 2021. "Board Reforms and Dividend Policy: International Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 56(4), pages 1296-1320, June.
    • Handle: RePEc:cup:jfinqa:v:56:y:2021:i:4:p:1296-1320_6
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    Cited by:

    1. Huang, Hua & Tao, Yunqing & Wang, Xueping & Feng, Chen & Ye, Yongwei, 2023. "Do board reforms in parent firms boost subsidiaries’ innovation?," Economic Modelling, Elsevier, vol. 125(C).
    2. Chen, Ruiyuan (Ryan) & Liu, Feiyu (Andy) & Zhao, Chen, 2024. "Worldwide board reforms and financial reporting quality," Research in International Business and Finance, Elsevier, vol. 69(C).
    3. Chang, Yuyuan & He, Wen & Mi, Lin, 2024. "Climate risk and payout flexibility around the world," Journal of Banking & Finance, Elsevier, vol. 166(C).
    4. Ricardo D. Brito & Paulo Sergio O. Ribeiro & Antonio Z. Sanvicente, 2021. "The Substitute Model of Dividends at Work: a change in minority shareholder protection," Working Papers, Department of Economics 2021_25, University of São Paulo (FEA-USP).
    5. Chen, Xiaoqi & Chih-Chieh Chris, Hsieh & Tsang, Albert & Xiang, Yi, 2022. "Cross-border enforcement of securities laws and dividend payouts," The British Accounting Review, Elsevier, vol. 54(6).
    6. To, Thomas & Wu, Eliza & Zhao, Diya, 2024. "Global board reforms and corporate acquisition performance," Journal of Corporate Finance, Elsevier, vol. 87(C).
    7. Yilin Luo & Chenkai Ni & James Thewissen, 2024. "Currency flotation and dividend policies: Evidence from China's central parity reform," Financial Management, Financial Management Association International, vol. 53(1), pages 145-174, March.
    8. Wang, Hu & Shen, Hong & Li, Shouwei, 2023. "Does green direct financing work in reducing carbon risk?," Economic Modelling, Elsevier, vol. 128(C).
    9. Simeng Liu & Kun Tracy Wang & Yue Wu, 2024. "Corporate Governance Reforms and Analyst Forecasts: International Evidence," Abacus, Accounting Foundation, University of Sydney, vol. 60(2), pages 272-304, June.
    10. Chen, Xiaoqi & Li, Weiping & Torsin, Wouter & Tsang, Albert, 2024. "Dividend policy under mandatory ESG reporting," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).
    11. Xiaoqiao Wang & Jing Xie & Bohui Zhang & Xiaofeng Zhao, 2024. "Unraveling the Dividend Puzzle: A Field Experiment," Working Papers 202406, University of Macau, Faculty of Business Administration.
    12. Salikhova, Tatiana & Ugarov, Alexander & Orlova, Svetlana, 2024. "Dividend smoothing and financial transparency," Finance Research Letters, Elsevier, vol. 62(PA).
    13. Hu, Jinshuai & Jiang, Haiyan & Wu, Yibing, 2023. "How does privatization affect cash dividends? Quasi-experimental evidence from China," Emerging Markets Review, Elsevier, vol. 57(C).
    14. Kambar Farooq & Muhammad Azeem & Chin Man Chui & Jun (Tony) Ruan, 2023. "Board Connections and Dividend Policy," Abacus, Accounting Foundation, University of Sydney, vol. 59(4), pages 983-1040, December.
    15. Eugen-Axel Mihancea & Marilen-Gabriel Pirtea & Florin-Claudiu Boțoc, 2021. "Bibliometric Analysis on the Recent Trends in Dividend Policy Research," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1051-1059, December.
    16. Akindayomi, Akinloye & Amin, Md Ruhul, 2022. "Does business strategy affect dividend payout policies?," Journal of Business Research, Elsevier, vol. 151(C), pages 531-550.
    17. Boulifa, Hichem & Uchida, Konari, 2024. "Do share offerings increase payouts?," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    18. Najah Attig, 2024. "Relaxed Financial Constraints and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 189(1), pages 111-131, January.
    19. Kaouther Chebbi & Mohammed Abdullah Ammer, 2022. "Board Composition and ESG Disclosure in Saudi Arabia: The Moderating Role of Corporate Governance Reforms," Sustainability, MDPI, vol. 14(19), pages 1-25, September.
    20. Hamdi Driss & Sadok El Ghoul & Omrane Guedhami & John K. Wald, 2023. "Governance and leverage: International evidence," The Financial Review, Eastern Finance Association, vol. 58(2), pages 261-285, May.
    21. Muhammad Farooq Ahmad & Nihat Aktas & Douglas Cumming & Guosong Xu, 2024. "Board reforms and M&A performance: international evidence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(5), pages 616-637, July.
    22. Weiping Li & Xuezhi Zhang & Shuyi Cheng & Xiaohang Ren, 2024. "Clear the air via dividends: Corporates' response to air pollution," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 3383-3396, May.

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