Trade-off between agency problem and growth opportunity on dividend payout policy under product market competition Online publication date: Fri, 10-Apr-2015
by Sue-Fung Wang; Meng-Shiang Chiu
International Journal of Corporate Governance (IJCG), Vol. 3, No. 2/3/4, 2012
Abstract: This paper investigates whether or not product market competition affects payout policy. According to literature, issues related to dividend payout policy comprise two competing hypotheses, namely, the maturity hypothesis and the free cash flow hypothesis. The former argues that growth opportunity and dividend payout have a negative relationship, whereas the latter argues that firms tend to increase dividend payouts in order to weaken agency problems. Existing studies seldom discuss the issue in which dividend payout policy faces the trade-off between growth opportunity and agency problem in different levels of product market competition. Therefore, employing regression analysis, we explored the current issue with US manufacturing firms as samples. The firms show the tendency to retain more cash to expand their growth opportunities and decide to pay fewer dividends in less-concentrated industries. Therefore, the dividend policy of firms is consistent with the maturity hypothesis in less-concentrated industries.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Corporate Governance (IJCG):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com
Our Blog 
Follow us on Twitter 
Visit us on Facebook