Abstract
For a panel of 1900 firms across 21 countries over 2004 to 2008, the impact of firm- and country-level governance on payout policy is consistent with La Porta, Lopez-de-Silanes, Shleifer, and Vishny (2000). In weak legal regimes, dividend and repurchase payout ratios increase in firm-level governance. In strong legal regimes, dividend payout ratios decrease in firm-level governance while repurchase payout ratios increase, suggesting a substitution from rigid dividends to flexible repurchases. These results are robust to an instrumental variable (IV) approach and an alternative firm-level governance measure in a larger panel of 9461 firms over 2002 to 2011.
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