Corporate governance ratings and the dividend payout decisions of Australian corporate firms

2015 ◽  
Vol 11 (2) ◽  
pp. 162-178 ◽  
Author(s):  
Subba Reddy Yarram
Keyword(s):  
Corporate Governance ◽  
Random Effects ◽  
Negative Impact ◽  
Unobserved Heterogeneity ◽  
Agency Cost ◽  
Positive Influence ◽  
Governance Mechanisms ◽  
Dividend Payout ◽  
Content Type ◽  
Significant Positive Influence

Purpose – The purpose of this paper is to examine the influence of corporate governance on the dividend payout decisions of Australian firms by considering two related objectives. First, it considers the role of corporate governance ratings (CGRs) on the decision to pay or not to pay dividends. Second, it considers the influence of CGRs on the average dividend payout level of Australian firms. Design/methodology/approach – The sample consists of 413 non-financial firms included in the All Ordinaries Index for the period 2004-2009. A logit model is employed to analyse the decision to pay or omit dividends. Similarly, tobit method is employed to analyse the factors influencing the dividend payout level of Australian firms. To control for unobserved heterogeneity, this study employs random effects panel logit and panel tobit models. Findings – This study finds that CGRs have a significant positive influence on the decision to pay dividends and on the average dividend payout level of Australian firms. Similarly, the present study finds support for signalling hypothesis as profitability has a significant positive influence and a loss dummy has a significant negative influence on the dividend payout decisions of Australian firms. The study also finds support for the life cycle hypothesis as growth opportunities have a significant negative impact on the average dividend payout level of Australian firms. This study finds no conclusive evidence of the existence of dividend tax clientele in Australia. Research limitations/implications – Dividends provide a complementary governance role consistent with the “outcomes model” of the agency cost theory as proposed by La Port et al. (2000). Practical implications – The findings have implications for corporate governance policies. Principle-based governance mechanisms work as well as the rule-based governance mechanisms in an environment characterized by high levels of investor protection and well-developed stock markets. Companies that are well governed may limit the opportunities for managers to expropriate shareholders and thus governance may reduce the contracting costs associated with compensation policies. Originality/value – This is the first study that examines the influence of governance on dividend policy using the CGRs developed by the WHK Horwath/University of Newcastle. Findings are robust and account for unobserved heterogeneity as random effects panel models are employed.

Corporate governance and financial policies

2015 ◽  
Vol 41 (3) ◽  
pp. 267-285 ◽  
Author(s):  
Subba Reddy Yarram ◽  
Brian Dollery
Keyword(s):  
Corporate Governance ◽  
Life Cycle ◽  
Dividend Policy ◽  
Agency Cost ◽  
Positive Influence ◽  
Independent Directors ◽  
Board Independence ◽  
Dividend Payout ◽  
Content Type ◽  
Significant Positive Influence

Purpose – The purpose of this paper is to examine the influence of board structure on dividend policy of Australian corporate firms. It also considers the traditional explanations of corporate dividend choice, such as agency cost theory, signalling hypothesis, the life cycle hypothesis along with tax-based explanations of dividend policy. Design/methodology/approach – The final sample consists of 413 non-financial firms that are part of the All Ordinaries Index. The causal analysis was undertaken in three stages. In the first stage, the authors analyse the likelihood of paying dividends. And classify all firms as either dividend payers or non-payers. The authors then model this binary variable as a function of different sets of variables. In the second stage, the authors analyse the factors determining the magnitude of dividend payout by those firms that have paid a dividend. In contrast, stage three employs all firms – those which did not pay any dividend and those firms which paid a dividend. Findings – For the study period 2004-2009, this study finds that board independence has a significant positive influence on the dividend payout of Australian firms. This finding is consistent with the “outcome” model of La Porta et al. (2000). This study also finds that size has a significant positive influence on the dividend payout of Australian firms thus providing support for the agency cost view of dividend policy. Similarly, this study also finds support for the signalling hypothesis and the life cycle theory given the significant positive influence of profitability and the significant negative influence of current losses and growth opportunities on the dividend policy of Australian firms. Research limitations/implications – The findings of the study are robust with to alternative measures of variables employed and are not influenced by the global financial crisis. However, this study did not consider the possible endogenous and multiple relationships between dividends, debt, profitability, cash holdings and governance structures given the limited study period considered. Practical implications – This study finds that board independence has a significant positive influence on the dividend behaviour of Australian firms. This suggests that dividends and independent directors play complementary governance roles. While dividends provide the monitoring and disciplinary roles, independent directors act as catalysts for enhancing effective board functioning. These findings have implications for corporate governance policies and the payout policies. Originality/value – Though the governance role of dividends has long been recognized in the literature (Easterbrook, 1984; Jensen, 1986), very few studies analyse the influence of board characteristics on the decision to pay dividends in Australia. Given the distinct Australian setting where the tax imputation system allows companies to pay franked dividends to domestic investors, this study provides evidence on the interaction of corporate and dividend policies. This study finds that dividend polices are influenced by percentage franking of dividends. This study also finds that board independence has a significant positive influence on the dividend policy of Australian firms.

Corporate governance and payout policy: evidence from India

2019 ◽  
Vol 19 (5) ◽  
pp. 1117-1132 ◽  
Author(s):  
Monika Rajput ◽  
Shital Jhunjhunwala
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Positive Influence ◽  
Family Ownership ◽  
Board Independence ◽  
Dividend Payout ◽  
Content Type ◽  
Significant Positive Influence

Purpose The purpose of this paper is to study the impact of ownership structure and corporate governance on dividend policy in emerging markets, like India. The study also analyses the moderation effects of board independence between ownership and dividend payout. Design/methodology/approach The data set of 1,546 Indian firms over the period of 2006-2017 has been used in this study. Tobit and logistic regression methods has been used. The data used in this study are collected from the Centre for Monitoring Indian Economy (CMIE) Prowess database. The sample firms are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Findings First, the study finds a significant positive influence of corporate governance on the decision to pay dividend and is an important determinant of the payout decision. Second, the study finds a significant negative relationship of family ownership with dividend payout decisions which indicates that family firms pay lower dividend. Finally, the result from the interaction effect of board independence with family ownership has significant positive influence on dividend policy. Originality/value This is one of the first attempt to show that there is an interaction between independent board and ownership structure. It shows that more independent and non-executive directors in the board of family controlled firms are likely to pay more dividends.

scholarly journals The Effect Of Corporate Governance Mechanisms On The Valuation Of Comprehensive Income Reporting In Nigeria

2020 ◽  
Author(s):  
Aliyu Baba Usman ◽  
Noor Afza Amran ◽  
Hasnah Shaari
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Fair Value ◽  
Agency Cost ◽  
Positive Influence ◽  
Governance Mechanism ◽  
Governance Mechanisms ◽  
Comprehensive Income ◽  
Corporate Governance Mechanisms ◽  
Other Comprehensive Income

This study investigates the influence of corporate governance mechanisms on the valuation of other comprehensive income in Nigeria. The sample of this study consists of 327 firm-year observations comprising of 117 firms listed on the Nigerian Stock Exchange for the period of 2010 to 2014. The findings reveal that there is a positive influence of corporate governance mechanism on the investors’ pricing of other comprehensive income. Findings show that for firms with weak governance mechanisms, other comprehensive income is value relevant, but is more significantly priced for strong governance firms. This study finds a similar result when other comprehensive income interact with individual elements of corporate governance factor. Therefore, corporate governance mitigates reliability concerns associated with fair value earnings, agency cost will be minimised and investors are more likely to view other comprehensive income as more value relevant. It is therefore recommended that reporting entities should pursue best corporate governance practices in order to enhance investors’ confidence in the reliability of other comprehensive income.  

Ownership structure, corporate governance and investment efficiency of Chinese listed firms

2017 ◽  
Vol 29 (3) ◽  
pp. 266-282 ◽  
Author(s):  
Naiwei Chen ◽  
Hao-Chang Sung ◽  
Jingjing Yang
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Fixed Effects ◽  
Negative Impact ◽  
Private Firms ◽  
Investment Efficiency ◽  
Governance Mechanisms ◽  
Content Type ◽  
Listed Firms ◽  
New Perspective

Purpose This paper aims to examine whether and how ownership structure and corporate governance have bearings on the investment efficiency of Chinese listed firms. Design/methodology/approach The authors measure the investment efficiency by following the work of Richardson (2006) and classify listed firms into two categories: state-owned enterprises (SOEs) and private firms. OLS regressions with both industry and year fixed effects are used to investigate the effect of ownership structure and governance mechanisms on the listed firms’ investment efficiency. Findings The authors find that ownership concentration has a negative impact on investment efficiency, and this effect is more pronounced in SOEs than in private firms. In addition, adoption of incentive-based compensation helps improve investment efficiency. Compared with other types of institutional investors, mutual funds are more likely to exert a positive effect on the investment efficiency of investee companies. Originality/value This paper examines the monitoring effect of governance mechanisms in China from a new perspective, which is the investment efficiency. Furthermore, previous studies provide minimal evidence indicating any effect of incentive-based compensation on firm performance in China. This study provides empirical evidence on this effect by using incentive-based compensation (whether CEOs have been granted stock options) as an explanatory variable in the regression models.

Corporate governance and voluntary disclosure: evidence from India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rupjyoti Saha ◽  
Kailash Chandra Kabra
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Audit Committee ◽  
Negative Influence ◽  
Positive Influence ◽  
Annual Reports ◽  
Corporate Board ◽  
Content Type ◽  
Different Types ◽  
Significant Positive Influence

Purpose This study aims to examine the influence of some prominent corporate governance (CG) mechanisms such as board size (BS), board independence (BI), role duality (RD), board’s gender diversity (GD), ownership concentration (OC), audit committee independence (ACI), nomination and remuneration committee (NRC) and risk management committee (RMC) on voluntary disclosure (VD), as well as different types of VD after controlling the effect of some firm-specific factors for Indian firms. Design/methodology/approach The study selects market capitalization-based top 100 non-financial and non-utility firms listed on the Bombay Stock Exchange as on 31st March 2014. Data are drawn from the Capitaline Plus database over the period of 2014–2018. Appropriate panel data regression model is applied to examine the influence of CG on VD. Findings The study reveals a significant negative influence of BI on VD while GD and RMC exhibit a significant positive influence on the same. The remaining CG mechanisms such as BS, RD, OC, ACI and NRC appear to have no significant influence on VD. Analysis into the relationship between CG mechanisms and different types of VD reveals that BI, in particular, has a strong negative influence on corporate strategic disclosure (CSD) and forward looking disclosure (FWLD) while GD and RMC both exhibit a significant positive influence on CSD, FWLD, CG disclosure and financial and capital market disclosure. Notably, none of the CG mechanisms under consideration influence human and intellectual capital disclosure. Research limitations/implications The study considers annual reports as the only medium of making VD and ignores all other sources such as websites and press releases. Besides, it mainly emphasizes on corporate board structure, board committees and OC while other ownership structure-related variables family ownership, managerial ownership are not covered, which can be analysed in future studies. Practical implications The study offers some important theoretical, as well as practical connotations for regulators and practitioners operating in India, as well as other emerging economies having similar institutional settings. Originality/value The study is the first of its kind in India that examines the influence of various CG mechanisms on different types of VD and thereby contributes novel findings in the context of an emerging economy.

Corporate governance mechanisms and agency costs: cross-country analysis

2016 ◽  
Vol 16 (2) ◽  
pp. 347-360 ◽  
Author(s):  
Tatiana Garanina ◽  
Elina Kaikova
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Gender Diversity ◽  
Agency Cost ◽  
Negative Influence ◽  
Empirical Literature ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Usa

Purpose The purpose of this paper is to investigate whether specific corporate governance mechanisms, such as board size, board composition, leverage and firm size, tend to mitigate agency cost occurrence in the USA, Russia and Norway. Design/methodology/approach The authors analyze the sample of 243 US, 196 Russian and 175 Norwegian joint stock companies for the period 2004-2012. The regression analysis is applied to test the models. Findings It is revealed that larger boards increase agency costs (measured by asset utilization ratio and asset liquidity ratio) in all sample companies. The proportion of female members has a very slight positive effect in US companies, a negative influence on agency costs in the Norwegian sample and is not significant in the Russian market. The authors find that the big Russian and US companies in the samples of this paper have lower agency costs. Practical implications The results of this paper show which agency-mitigation mechanisms work more effectively in companies operating in the analyzed countries characterized by specific corporate governance models. Originality/value The main contribution of this paper to the empirical literature is that it extends the stream of agency research by introducing new, emerging markets: represented by Scandinavian (depicted by the Norwegian sample) and Russian companies. Considering that each market – US, Norwegian and Russian – represents significant distinguishing features in their institutional framework, the paper provides an important research setting in which corporate governance mechanisms can be analyzed from the perspective of a country’s peculiar characteristics. Unlike other agency cost studies, this paper accounts for the gender diversity component in the companies and contributes to gender diversity issues.

The mediating effect of dividend payout on the relationship between internal governance and free cash flow

2018 ◽  
Vol 18 (4) ◽  
pp. 748-770 ◽  
Author(s):  
Moncef Guizani
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Free Cash Flow ◽  
Mediating Effect ◽  
Governance Mechanisms ◽  
Internal Governance ◽  
Dividend Payout ◽  
Content Type ◽  
Internal Governance Mechanisms ◽  
The Relationship

PurposeThis paper aims to examine the mediating effect of dividend payout on the relationship between internal governance mechanisms (board of directors and ownership structure) and the free cash flow level.Design/methodology/approachLinear regression models are used to investigate such relationships applying data from a sample of 207 non-financial firms listed on the Gulf Cooperation Council countries’ stock markets between 2009 and 2016. To test the significance of mediating effect, the author uses the Sobel test.FindingsThe author finds a partial mediation effect of dividend on the relationship between both board independence and managerial ownership and the level of free cash flow. The results confirm the major role of outside directors in corporate governance. This governance mechanism contributes to the protection of shareholders’ interests through a generous dividend policy. However, the author finds that large managerial shareholdings increase the level of free cash flow through lower dividend payouts. This result suggests that powerful managers follow their preference of retaining excess cash to their own interests.Practical implicationsThis paper offers insights to policy-makers of emerging economies interested in the development of the corporate governance. This study provides guidance for firms in the construction and implementation of their own corporate governance policies.Originality/valueThe main contribution of the present paper is to examine the dividend payout as a potential mediating variable between internal governance mechanisms and free cash flow. Moreover, it highlights the issue of efficient management of substantial funds inSharia-compliant and non-Sharia-compliant firms.

The impact of board independency, CEO duality and CEO fixed compensation on M&A performance

2017 ◽  
Vol 17 (5) ◽  
pp. 947-971 ◽  
Author(s):  
Emanuele Teti ◽  
Alberto Dell’Acqua ◽  
Leonardo Etro ◽  
Michele Volpe
Keyword(s):  
Corporate Governance ◽  
Positive Influence ◽  
Governance Mechanisms ◽  
Ceo Duality ◽  
Content Type ◽  
Good Corporate Governance ◽  
Corporate Governance Mechanisms ◽  
The Us ◽  
The Impact

Purpose This study aims to examine whether particular corporate governance mechanisms influence the performance of mergers and acquisitions. Design/methodology/approach Regression analyses investigating 1,596 recent acquisitions in the US market completed over the five-year period from 2009 to 2013 are performed. Findings The results show that board independency, CEO duality and level of CEO fixed compensation have an impact on the return of acquisitions. Moreover, the findings indicate that acquisitions significantly create value for bidders delivering a positive cumulative abnormal return upon announcement. Finally, also focusing on the 690 relative larger deals, there is a clear evidence of a positive influence of good corporate governance mechanisms over the quality of acquisitions completed. Originality/value To our knowledge, this is the first paper trying to identify corporate governance mechanisms related to the best acquisition decisions, by using specifically the three corporate governance variables (CEO duality, CEO fixed compensation and board independency).

scholarly journals The association between disclosures on control system over financial reporting and mechanisms of corporate governance: Empirical evidence from Germany and Poland

2020 ◽  
Vol 56 (4) ◽  
pp. 351-369
Author(s):  
Jacek Gad
Keyword(s):  
Corporate Governance ◽  
Control System ◽  
Financial Reporting ◽  
Audit Committee ◽  
Negative Impact ◽  
Supervisory Board ◽  
Positive Influence ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
The Impact

AbstractThe aim of the research was to determine the impact of selected corporate governance mechanisms on the scope of disclosures related to control system over financial reporting in Poland and Germany. The research group comprised of companies from the Warsaw WIG 30 index and the German DAX index in 2013. The disclosures were measured by the number of detailed disclosures about control system over financial reporting presented by the surveyed companies. The research results indicate that selected corporate governance mechanisms affect the scope of disclosures regarding the system of control over financial reporting. It was found that the number of supervisory board committees and the number of meetings of the supervisory board have a significant positive influence on the scope of disclosures regarding control over financial reporting. But, the increase in number of meetings of the audit committee has a significant negative impact on the scope of disclosures regarding control over financial reporting. The results of the research also indicate the role of national determinants of the scope of disclosures. The study was a comparative one nature and was conducted among companies from developed and developing capital markets.

Detrimental effects of post-IPO corporate governance changes

2017 ◽  
Vol 55 (2) ◽  
pp. 234-247 ◽  
Author(s):  
Guclu Atinc ◽  
Mark Kroll ◽  
Bruce Walters
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Initial Public Offering ◽  
Boards Of Directors ◽  
Negative Impact ◽  
Entrepreneurial Firms ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Governance Changes

Purpose The authors contend that immediately following the initial public offering (IPO), the new owners that replace the original ones are likely to request changes in two corporate governance mechanisms, board of directors and top management teams (TMTs). Following these alterations, the purpose of this paper is to propose that such changes will be detrimental for the performance of young entrepreneurial firms. Design/methodology/approach This study examines the post-IPO governance changes in young entrepreneurial firms. The sample consists of 185 companies that went public between 2001 and 2005. A hierarchical linear regression approach with the appropriate control variables is adopted to test the proposed hypotheses. Findings The results revealed that, following the changes in ownership structure post-IPO, changes are observed in one of the corporate governance mechanisms the authors considered, boards of directors, but not TMTs. Consistent with the general theme of this study, the authors also observed a negative impact of changes in boards of directors on subsequent firm performance; this was not the case with TMTs. Research limitations/implications Contrary to the fundamental contentions of agency theory, the results highlight the need for adopting a different approach for young entrepreneurial firms. Practical implications The findings highlight the importance of preserving the entrepreneurial efficacy of young entrepreneurial firms. Originality/value This paper challenges the fundamental contentions of agency theory in the case of young entrepreneurial firms. The results demonstrate that post-IPO shareholders’ interference with the governance mechanisms results in lower performance.

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