Political institutions,stock market liquidity and firm dividend policy: Some international evidence |
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| Institution: | 1. Department of Accounting, Deakin University, Melbourne, Australia;2. School of Accounting and Finance, The Hong Kong Polytechnic University, Hong Kong;3. Department of Accountancy, City University of Hong Kong, Hong Kong;1. Accounting Department, Auckland University of Technology, New Zealand;2. Accounting Discipline Group, University of Technology Sydney, Australia;1. Martin J. Whitman School of Management, Syracuse University, 721 University Avenue, Syracuse, NY 13244-2450, United States;2. W.P. Carey School of Business, Arizona State University, BA267C, Tempe, AZ 85287-3606, United States;3. Trulaske College of Business, University of Missouri-Columbia, 303 Cornell Hall, Columbia, MO 65211, United States;4. Accounting and Finance, College of Management, University of Massachusetts-Boston, Boston, MA 02125, United States;1. Monash Business School, Monash University, Melbourne, Vic 3800, Australia;2. Discipline of Accounting and Finance, Newcastle Business School, University of Newcastle, Sydney, NSW 2000, Australia;3. Department of Banking and Finance, Monash Business School, Monash University, Melbourne, Vic 3800, Australia;4. School of Commerce, University of Southern Queensland, Toowoomba, Qld 4350, Australia;1. Faculty of Business, University of Wollongong in Dubai, Dubai, United Arab Emirates;2. Faculty of Business, Economics and Social Development, Universiti Malaysia Terengganu, 21030 Kuala Terengganu, Terengganu, Malaysia;3. Bangor Business School, Hen Goleg, Bangor University, College Road, Bangor LL57 2DG, United Kingdom;1. Department of Accounting and Corporate Governance, Macquarie Business School, Macquarie University, NSW 2109, Australia;2. School of Accountancy, Massey University, Private Bag 102904, Auckland, New Zealand |
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| Abstract: | In this cross-country study, we draw on the dividend liquidity hypothesis and the political economy literature to examine whether political institutions affect the relationship between stock market liquidity and a firm’s dividend policy. In countries with weak political institutions, we expect that investors are less able to demand higher dividends for stocks with low liquidity. Using a sample of 52 countries, we show that the negative association between stock market liquidity and dividends is more pronounced in countries with sound political institutions, consistent with the “outcome” model of dividends. These results are stronger in countries with better legal institutions and weaker for firms with financial constraints. |
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| Keywords: | Political institutions Legal institutions Dividend policy Stock market liquidity |
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