Do country-level legal, corporate governance, and cultural characteristics influence the relationship between insider ownership and dividend policy?

Abstract

We explore how the effects of the change in insider ownership concentration on the dividend policy in different legal, corporate governance, and cultural environments in Asian countries. The severity of agency problems of controlling insiders and outside investors in Asian countries provides a unique circumstance for exploring this issue. Unlike previous findings, we find an inverse U-shaped relation between insider ownership and dividend payouts in Asian countries. Second, we note that Asian firms in common law countries pay higher dividends compared with Asian firms in civil law countries. We further find that countries with more robust corporate governance structure have higher dividend payouts, and there is an inverse U-shaped relation between insider ownership and dividend payouts in Asian countries with more robust corporate governance. Finally, we also find cultural dimension measures play an essential role in payout policy.