Dividend Policy and Corporate Governance

Dividend Policy and Corporate Governance

Dividend Policy and Corporate Governance

Dividend Policy and Corporate Governance


Dividends are not only a signal about a firm's prospects under asymmetric information, but they can also act as a corporate governance device to align the management's interests with those of the shareholders. Dividend Policy and Corporate Governance is the first comprehensive volume on therelationship between dividend policy and corporate governance, and examines in detail empirical studies and current theories. Reviewing the interactions between dividend policy and other corporate governance mechanisms, it compares results for the UK and the US with those for other countries such as France, Germany, and Japan, and provides new empirical evidence on corporate governance in continental Europe and its impacton dividends. Focusing on one of the main representatives of this system, Germany, it highlights major differences between the dividend policies of German firms and those of UK or US firms. Conventional wisdom states that German dividends are lower than UK or US dividends, yet on a published-profitsbasis the exact converse is true. In addition, the authors demonstrate a link between corporate control structures and dividend payouts, report evidence that the existence of a loss is an additional determinant of dividend changes, and demonstrate that the tax status of the controlling shareholderand the firm's dividend payout are not linked. The conclusions reached in this book have important implications for the current debate on corporate governance, making it invaluable for academics, finance professionals, regulators, and legal advisors.


The spectacular failures of Enron and Worldcom certainly prove that corporate governance is still a highly relevant and timely topic, even for a capital market, the us market, which is thought to be highly developed and thought to provide one of the highest levels of investor protection and information disclosure. the serious problems of, among others, the Dutch retailer Ahold show that Europe is not immune either to misrepresentation of corporate information. Although the academic literature on corporate governance is developing quite rapidly, little is known about markets other than the uk or usa. We also know very little about the interaction between corporate governance and one of the major financial decisions that companies take, that is dividend policy. This book intends to close these gaps.


Manchester and Tilburg

September 2003

Luis Correia da Silva

Marc Goergen

Luc Renneboog . . .

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