Linking investment opportunities, credit market development and dividend repatriation policy

Abstract

This study aims to examine the impact of investment opportunities and the global financial crisis on dividend repatriation policy. Additionally, it investigates the interaction effect of credit market development on the association between investment opportunities and dividend repatriation policy. The current study uses secondary data concerning the foreign subsidiaries of US MNCs in 50 countries during the period 2005–2016. Dynamic panel generalised method of moments (GMM) estimator is applied to estimate the dynamic dividend repatriation models. The findings reveal that investment opportunities in the host country significantly negatively influence the dividend repatriation policy. However, credit market development in the host country significantly positively interacts the link between investment opportunities and dividend repatriation policy. This implies that credit market development reduces the negative impact of investment opportunities on the dividend repatriation policy. Further, the findings suggest that dividend repatriation by US MNCs increased significantly during the global financial crisis.