Dividend Policy, Corporate Governance, and the Capital Markets

Abstract

This paper examines whether there is a difference between the dividend policies practiced by firms operating in countries with different financial systems, namely, bank-based and market-based systems. Our results show that the dividend payout ratio is significantly higher for bank-based countries. When firms are grouped according to whether they are in market-based countries or in bank-based countries, the level of investor protection is positively related to dividend payout in market-based financial systems but negatively related to dividend payout in bank-based fmancial systems.