Law, Ownership, Corporate Governance , and Dividend Payout Policy: Evidence from 33 Countries
Miller and Modigiliani (1961) prove that dividend policy is irrelevant to share value in perfect and efficient capital markets. In this setup, no rational investor has a preference between dividends and capital gains. However, dividend payout policy is still discussed extensively until now. In this proposal, I use a sample of companies from 33 countries around the world to shed light on the relationship among legal origin, insider holdings, corporate governance, and dividend payout policy. This idea mainly comes from Professor Shiu in corporate finance class at NCU.
La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1998, henceforth referred to as LLSV) examine laws differ around the world give investors limited bundle of rights. Countries of the common-law traditions tend to protect investors more than the civil-law. LLSV (1998) remind us the importance of law to investor protection around different countries. After LLSV (1998), LLSV (2000a) find that a common element explaining these differences is how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. Moreover, they show that common law counties assign higher valuations to publicly-traded stock. LLSV (2000b) state that the agency approach is highly relevant to an understanding of corporate dividend policies around the world. Firms operating in countries with better protection of minority shareholders would pay higher dividends. Their results support the version of the agency theory in which investors in good legal protection countries use their legal powers to extract dividends from firms, especially when reinvestment opportunities are poor. However, LLSV (2000b) just test the dividend payout ratio of many firms in different law. Therefore, I deeply study dividend payout policy across different countries. In my proposal, I use legal origin, inside ownership, and corporate governance, totally three surfaces, to clarify
La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1998, henceforth referred to as LLSV) examine laws differ around the world give investors limited bundle of rights. Countries of the common-law traditions tend to protect investors more than the civil-law. LLSV (1998) remind us the importance of law to investor protection around different countries. After LLSV (1998), LLSV (2000a) find that a common element explaining these differences is how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. Moreover, they show that common law counties assign higher valuations to publicly-traded stock. LLSV (2000b) state that the agency approach is highly relevant to an understanding of corporate dividend policies around the world. Firms operating in countries with better protection of minority shareholders would pay higher dividends. Their results support the version of the agency theory in which investors in good legal protection countries use their legal powers to extract dividends from firms, especially when reinvestment opportunities are poor. However, LLSV (2000b) just test the dividend payout ratio of many firms in different law. Therefore, I deeply study dividend payout policy across different countries. In my proposal, I use legal origin, inside ownership, and corporate governance, totally three surfaces, to clarify