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Corporate governance and dividend policy of the US and Indian companies

Author

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  • Sunaina Kanojia

    (University of Delhi)

  • Bunny Singh Bhatia

    (University of Delhi)

Abstract

The paper examines the relationship between corporate governance and dividend payout, using a sample of Indian and US listed firms. In contrast with the substitution hypothesis, but in line with the outcome hypothesis, this study documented that companies with good corporate governance pay higher dividends than companies with weak corporate governance. Specifically, board independence, board size and institutional ownership are the key corporate governance drivers of dividend payout in US firms, while none of the individual corporate governance parameters is significantly associated to dividend payout in for Indian firms. An investor can use this information to make an investment decision. Financial Regulators need to improve corporate governance framework to enhance the disbursement of dividend and mitigate the agency problem. Companies need to consider the signalling effect of dividend payments while framing their dividend policy in both countries.

Suggested Citation

  • Sunaina Kanojia & Bunny Singh Bhatia, 2022. "Corporate governance and dividend policy of the US and Indian companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(4), pages 1339-1373, December.
    • Handle: RePEc:kap:jmgtgv:v:26:y:2022:i:4:d:10.1007_s10997-021-09587-5
    DOI: 10.1007/s10997-021-09587-5
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    More about this item

    Keywords

    Signalling; Corporate Governance; Dividend Payout; India; Board Independence; Institutional ownership;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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