The effect of board independence on dividend payouts: A quasi-natural experiment
Issued Date
2022-11-01
Resource Type
ISSN
10629408
Scopus ID
2-s2.0-85142195502
Journal Title
North American Journal of Economics and Finance
Volume
63
Rights Holder(s)
SCOPUS
Bibliographic Citation
North American Journal of Economics and Finance Vol.63 (2022)
Suggested Citation
Chintrakarn P., Jiraporn P., Treepongkaruna S., Mook Lee S. The effect of board independence on dividend payouts: A quasi-natural experiment. North American Journal of Economics and Finance Vol.63 (2022). doi:10.1016/j.najef.2022.101836 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/87526
Title
The effect of board independence on dividend payouts: A quasi-natural experiment
Author's Affiliation
Other Contributor(s)
Abstract
Motivated by agency theory, we investigate the effect of board independence on dividend policy. We exploit as a quasi-natural experiment the passage of the Sarbanes-Oxley Act and the associated exchange listing requirement, mandating firms to have a majority of independent directors. Our difference-in-difference estimates show that firms forced to raise board independence are significantly more likely to pay dividends than firms not required to change board independence. Our results are consistent with the notion that stronger board independence forces managers to disgorge more cash to shareholders, thereby reducing what is left for possible expropriation by opportunistic managers. Based on an exogenous regulatory shock, our results are more likely to show a casual effect, rather than merely an association.