Investment in Hard Times: Unintended Effects of Mandatory Dividend Policy in State-Owned Business Group

This study examines the determinants of two important dividend policy decisions specifically the dividend payment decision and the dividend payout level decision of 781 sample Indian firms enlisted on National Stock Exchange (NSE) over the period, 1995–2015, comparing the business group-affiliated firms with the standalone firms. In term of characteristics, the business group-affiliated firms are larger, more profitable and more levered than the standalone firms. The empirical results suggest that the dividend policy decisions of business group-affiliated firms differ significantly from that of the standalone firms. In the case of standalone firms, the firms with high investment opportunities, high financial leverage and high business risk are less likely to pay dividends, and their dividend payout levels are lower. On the other hand, the firms affiliated with business groups are more likely to pay dividends, and their dividend payout levels are higher even when they have high investment opportunities, high financial leverage and high business risk. Overall, the findings suggest that although the business groups are able to create internal capital markets (ICMs) and shield their member firms from market imperfections, they may suffer from other information asymmetry problems.

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CEO Overconfidence and Dividend Policy : Evidence from Korean Large Business Group (Chaebols)

Review of Financial Information Studies ◽

10.35214/rfis.7.1.201802.003 ◽

2018 ◽

Vol 7 (1) ◽

pp. 61-90

Author(s):

Gyuyoung Hwang ◽

B A

Keyword(s):

Dividend Policy ◽

Business Group

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Corporate Sustainable Management, Dividend Policy and Chaebol

Sustainability ◽

10.3390/su13137495 ◽

2021 ◽

Vol 13 (13) ◽

pp. 7495

Author(s):

Hyunmin Oh ◽

Sambock Park

Keyword(s):

Corporate Governance ◽

Significant Relationship ◽

Sustainable Management ◽

Positive Relationship ◽

Dividend Policy ◽

Business Group ◽

Positive Direction ◽

Empirical Results ◽

Dividend Policies ◽

The Relationship

This study empirically examines the relationship between corporate sustainable management (CSM) and dividend policy. Among the various motivations related to dividends, this study examines the relationship between CSM and dividend policy based on the agency and signaling theory. After examining the relationship between CSM and dividend policy, we investigate whether belonging to a large business group (chaebol group) has a significant effect on the relationship between CSM and dividend policy. The analysis period is from 2011 to 2018, and the ESG ratings of the Korea Corporate Governance Service are used as proxies for CSM. The empirical results show that CSM and dividends have a significant relationship in the positive direction. This means that firms with excellent CSM activities have higher dividend levels than those that do not. Furthermore, the association between CSM and dividends is more negative for firms belonging to a chaebol group. This indicates that the positive relationship between CSM and dividends in a firm that belongs to a chaebol group is weakened. This means that the relationship between CSM and dividends in the group belonging to the chaebol group is weakened. It belongs to the group of conglomerates, meaning that the relationship between the amount of dividends and CSM weakened. Our study focuses on CSM as a determinant of dividends, and examines the effects of belonging to a chaebol group in the relationship between CSM and dividends. Given that resolving the interest incompatibility between investors and managers is the focus of corporate governance, dividend policies can be used as a method for resolving the interest incompatibility between investors and managers.

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