Do CEO Duality and Ownership Concentration Impact Dividend Policy in Emerging Markets? The Moderating Effect of Crises Period

Anis El Ammari

doi:10.3390/ijfs9040062

Abstract

Despite developments of recent theoretical and numerous empirical studies on the policies effectively adopted by companies, the dividend distribution policy (DDP) remains largely unexplained. In this regard, the main purpose of the current study is to empirically examine the effects of both CEO duality and ownership concentration on DDP during a crisis period. Furthermore, we test, using an interaction variable, the moderating effect of the crisis period on the association between both the degree of CEO duality and the ownership concentration on the DDP by analyzing panel data on selected listed firms in an emerging economy, namely, Tunisia. Based on a sample made up of 576 firm-year observations over the period 1996–2019, the findings of this research indicate that the crisis period plays an important role in mitigating the positive effect of both CEO duality and ownership concentration on DDP. The findings confirm furthermore that the crisis period on the one hand and both CEO duality and ownership concentration on the other represent two competing forces influencing DDP. Our results also support the agency theory on which DDP depends, among other things, family ownership, board and company size, and ROE.

Highlights

The dividend is a fundamental component of profitability, which makes it possible on the one hand to retain shareholders who are interested in a high income and, on the other hand, to convey information between managers, shareholders, the company, and the market (Floyd et al 2015; Brawn and Sevic 2018)
The findings indicate that when the Chief Executive Officer (CEO) is at the same time chair of the board (COB), Tunisian firms are inclined to pay out more dividends than when the two functions are held by two different persons
An interesting contribution of our study is to test whether the impact of ownership structure and CEO duality change during a crisis period

Summary

Introduction

The dividend is a fundamental component of profitability, which makes it possible on the one hand to retain shareholders who are interested in a high income and, on the other hand, to convey information between managers, shareholders, the company, and the market (Floyd et al 2015; Brawn and Sevic 2018). In this respect, the issue of DDP has been the subject of numerous theoretical and empirical studies for several decades (e.g., Lintner 1956; Miller and Modigliani 1961; Rozeff 1982; Easterbrook 1984; Smith and Watts 1992; Adaoglu 2000). The increase in additional research work on the DDP—like Taleb and Ben Lahouel (2020); Duqi et al (2020); Tahir et al

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Conclusion