Title: Firm-level governance quality and dividend decisions: evidence from India

Authors: P. Krishna Prasanna

Addresses: Department of Management Studies, Indian Institute of Technology, Madras, Chennai – 600036, India

Abstract: Motivated by the outcome model of agency theory, the primary research issue addressed in this paper is to measure firm-level governance quality of Indian firms and examine its impact on dividend payment decision and payout-level decision. The companies with higher corporate governance quality have higher dividends payout ratios. It was found that board size, independence, monitoring quality, and managerial remuneration had positive impact on dividend payout. Insiders' (promoter directors) equity holding had a negative impact on dividend payout; whereas, the share holding of outside owners had a positive impact. The results support the outcome model proposed by La Porta et al. (2000a, 2000b) and infer that better governed companies tend to have higher payout ratios. The results also provide positive evidence about the impact of recent corporate governance reforms introduced in India.

Keywords: dividends; corporate governance; board independence; ownership pattern; governance quality; India; agency theory; dividend payments; payment decisions; payout levels; board size; monitoring quality; managerial remuneration; equity holding; share holding.

DOI: 10.1504/IJCG.2014.064726

International Journal of Corporate Governance, 2014 Vol.5 No.3/4, pp.197 - 222

Received: 08 Oct 2013
Accepted: 06 May 2014

Published online: 30 Apr 2015 *

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