CORPORATE BOARDS, OWNERSHIP STRUCTURE AND DIVIDEND PAYOUT: EVIDENCE FROM BAHRAIN

Abstract

The aim of this study is to empirically examine the effect of corporate board characteristics and ownership structure on dividend payout decision in Bahrain. Ordinary least-squares regression is used to examine the relationship between the dividend payout decisions of Bahraini listed companies as dependent variable and six corporate governance mechanisms as independent variables and two other firm-specific attributes, as control variables. The empirical results indicate that, board independence has a significant negative association with the dividend payout decision, whilst board size has a significant positive association with the dividend payout decision. By contrast, the empirical results suggest that the frequency of board meetings and ownership structure (i e. blockholder ownership, institutional ownership, managerial ownership) do not have any significant effect on the dividend payout decisions. The findings of this study are important because they provide insight into the effect of agency problems specific to corporate governance and dividends and are important for companies, investors as well as the policy makers and regulators in Bahrain. This paper's contribution to the existing literature is threefold: it provides evidence on the relation between board characteristics and ownership structure on dividend payout in Bahrain; it provides new evidence on the importance and effectiveness of corporate governance mechanisms that influence the firm dividend payout decision; and contributes to the literature by analyzing data from an emerging stock market.