Do corporate governance and ownership structure impact dividend policy in emerging market during financial crisis?

Abstract

PurposeThe purpose of this paper is to study the impact of the ownership structure and board governance on dividend policy in emerging markets. The authors test whether the effects of corporate governance on dividend policy change during crisis periods.Design/methodology/approachThe authors use a panel regression approach on a sample of 362 non-financial listed firms from East Asian and Gulf Cooperation Council countries.FindingsThe results provide evidence that dividend payout decision increases with institutional ownership and board activity. The authors find that in emerging countries, dividend policy of firms with CEO duality and without CEO duality does not depend on the same set of factors. It is shown that the ownership concentration and board independency affect significantly the dividend policy of firms with COE duality. Finally, the results show that during the recent financial crisis, dividend decision is inversely related to CEO duality, board size and the frequency of board meetings.Research limitations/implicationsOther variables of corporate governance and ownership structure can be studied more in depth. The results can be directly compared to an alternative sample of developed countries.Practical implicationsThis study is of particular interest for managers and shareholders when adjusting their strategies of dividend payout during financial crisis.Originality/valueThe authors employ a specific approach to investigate the impact of CEO duality on dividend policy in East Asian countries. An important aspect of the results is that that for firms with CEO who is also the chairperson, the dividend decision is negatively related to ownership concentration and board independence. This research contributes to the understanding of dividend policy by testing whether the impact of corporate governance on dividend policy changes during crisis periods in emerging countries. To the best of the authors’ knowledge, this work is the first to directly address this issue from this perspective.