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Economic policy uncertainty and dividend policy: Insight from private firms

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  • Choi, Young Mok
  • Park, Kunsu

Abstract

This study examines whether economic policy uncertainty (EPU) is associated with corporate dividend policy. Using a sample of private firms, we find that EPU is negatively related to dividend payouts. Our main findings are robust to endogeneity concerns, omitted variable problems, simultaneity bias, and alternative measures of EPU. Further, we find that firms are less likely to pay dividends when EPU is higher, confirming our main results. We also find that the negative relation between EPU and dividend payouts is stronger for firms with higher leverage, operating cash flows, sales growth, return on assets, and cash flow volatility than their counterparts. In contrast, the negative relation is weaker for firms with higher retained earnings-to-total equity ratios. Our study highlights that issues such as EPU can influence the dividend payout policies of private firms.

Suggested Citation

  • Choi, Young Mok & Park, Kunsu, 2024. "Economic policy uncertainty and dividend policy: Insight from private firms," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pb:s1057521924006240
    DOI: 10.1016/j.irfa.2024.103692
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    More about this item

    Keywords

    Economic policy uncertainty; Dividend policy; Private firms; Korea;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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