Product Market Competition, Dividend Policy, and Shareholder Protection: The International Evidence

38 Pages Posted: 2 Feb 2017

See all articles by Bobby Alexander

Bobby Alexander

Fort Hays State University

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Sanjiv Sabherwal

University of Texas at Arlington - Department of Finance and Real Estate

Date Written: February 1, 2017

Abstract

This study examines whether dividend payout, an internal corporate governance mechanism, is a substitute or an outcome of product market competition, an external corporate governance mechanism. The sample includes firms in six of the world’s most prominent economies. We find that firms in more competitive industries pay less in the way of dividends to their shareholders, which is consistent with the notion that dividends and competition are substitutes. We also determine that the negative relationship between dividends and competition is attenuated by the passage of the Sarbanes-Oxley Act (SOX) and is weaker in countries with a stronger set of protections for minority shareholders. Our empirical findings are robust to alternative measures of dividend payout, industry definition, and shareholder protection.

Keywords: Dividends; Payout, Concentration, Competition, Shareholder protection, SOX

JEL Classification: G30, G35

Suggested Citation

Alexander, Bobby and Ferris, Stephen P. and Sabherwal, Sanjiv, Product Market Competition, Dividend Policy, and Shareholder Protection: The International Evidence (February 1, 2017). Available at SSRN: https://ssrn.com/abstract=2909936 or http://dx.doi.org/10.2139/ssrn.2909936

Bobby Alexander

Fort Hays State University ( email )

Hays, KS 67601
United States

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

Sanjiv Sabherwal (Contact Author)

University of Texas at Arlington - Department of Finance and Real Estate ( email )

Box 19449 UTA
Arlington, TX 76019
United States
817-272-3705 (Phone)
817-272-2252 (Fax)

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