خبرگی مالی هیئت مدیره و رفتار سود سهام شرکت ها
Abstract
1- Introduction
2- Theoretical framework and hypothesis development
3- Two rising power of Asia – China and Pakistan
4- Data and research methodology
5- Empirical findings
6- Conclusion
Appendix 1
Appendix 2
Appendix 3
References
Abstract
Purpose – Numerous researchers have developed theories and studies to uncover the issues pertinent to dividend policy dynamics, but it is still one of the unresolved problems of finance. The purpose of this paper is to focus on a new dimension, i.e., financial expertise on the corporate board for explaining the dividend policy dynamics in the emerging equity markets of China and Pakistan. Design/methodology/approach – The study employs static (fixed effect (FE) and random effect (RE)) and dynamic models – two-step generalized method of moments (GMM) estimation techniques by Arellano and Bond (1991) and Arellano and Bover (1995) – during the timespan from 2009 to 2014. Further, this study re-estimated FE, RE and GMM two-step estimation techniques by excluding the non-dividend-paying companies, and also employed instrumental variable regressing by using two instrumental variables – industry average financial expertise of the board and board size – as proxies for board financial expertise to control the possible endogeneity. Findings – The study reveals that Chinese firms having more financial expertise on the board do not take dividends as a control mechanism (substitution hypothesis), while Pakistani firms support the compliment hypothesis and use dividends as a control mechanism to mitigate agency conflict to protect shareholders’ interests and keep additional funds from the manager’s opportunism. Further robustness models also confirm the presence of a significant association between dividend policy and board financial expertise in both equity markets. Originality/value – This study introduces the financial expertise on a board as a determinant of dividend policy. To the best of the authors’ knowledge, no previous studies have focused on board-level financial expertise as a contributing factor toward dividend policy
Introduction
Dividend policy behavior is at the core of finance theories and is still the most debatable and prominent issue in the corporate finance literature for both developed and developing markets. Numerous researchers have devised theories and studies to uncover the issues pertinent to dividend policy dynamics, but Black (1976) refers to the dividend as a puzzle. Brealey and Myers (2005) argue that the dividend is among the top ten unresolved problems of finance. Lintner (1956) proposes the dividend partial adjustment model and suggests that current year profits and previous year dividends are the only two contributing factors for a firm’s dividend. Later, many researchers introduced their works to suggest the key factors that drive a firm’s dividend policy. A plethora of literature identifies debt financing, earning measures, free cash flows, firm growth, investment opportunities, firm size, large shareholders, firm risk level, etc., as potential contributors for determining a firm’s dividend policy for both developed and developing markets (Bhattacharya, 1979; Ho, 2003; Kale and Noe, 1990; Charitou, 2000; Al-Malkawi, 2007; Anil and Kapoor, 2008; Juma’h and Pacheco, 2008; Ahmed and Javid, 2009; Ramli, 2010; Mehrani et al., 2011; Al-Shabibi and Ramesh, 2011; Hashemi and Zadeh, 2012; Appannan and Sim, 2011). In addition to these factors, researchers have also identified board size, board composition, board independence, board gender, ownership concentration, outside directors, audit type, CEO power, institutional ownership, investor protection and shareholder rights as the key determinants of dividend policy under the umbrella of corporate governance (Adjaoud and Ben‐Amar, 2010; Abor and Fiador, 2013; Setia-Atmaja, 2010; Erol and Tirtiroglu, 2011; Al-Shabibi and Ramesh, 2011; La Porta et al., 2000). The literature on dividend policy is too extensive to survey here, but Baker et al. (2011) argue that divided policy still vexes financial economists. Despite the ample literature published on the dividend behavior of firms, there is still room to understand what factors drive the dividend pay-out decision.