Fidrmuc, Jana P. and Jacob, Marcus. (2010) Culture, agency costs, and dividends. Journal of Comparative Economics, Vol.38 (No.3). pp. 321-339. ISSN 0147-5967

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Abstract

This paper presents a culturally rooted agency explanation for differences in dividend payout policies around the world. We conjecture that the social normative nature of culture influences the character of agency relations and determines the acceptance and legitimacy of different dividend payout strategies across different countries. By linking dividends to cultural differences across 5797 firms in 41 countries, our analysis shows that high individualism, low power distance, and low uncertainty avoidance are significantly associated with higher dividend payouts. A comprehensive set of robustness tests in which we control for legal institutions, share repurchases, corporate debt ratios, and ownership structures confirms that culture is a relevant factor when analyzing dividend distributions. Our results further show that legal institutions and culture as a social institution have complementary effects on dividend payouts. Overall, our finding that culture matters suggests important implications for a wide range of agency-based economic and capital market phenomena. Journal of Comparative Economics 38 (3) (2010) 321-339. Warwick Business School, University of Warwick, Coventry CV4 7AL, United Kingdom; Harvard University, Department of Government, Cambridge, MA 02138, United States; European Business School (EBS), Oestrich-Winkel, Germany. (C) 2010 Association for Comparative Economic Studies All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Comparative Economics
Publisher:	Elsevier
ISSN:	0147-5967
Official Date:	September 2010
Volume:	Vol.38
Number:	No.3
Number of Pages:	19
Page Range:	pp. 321-339
Identification Number:	10.1016/j.jce.2010.04.002
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/5082

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