Chintrakarn P.Chatjuthamard P.Jiraporn P.Kyaw K.Mahidol University2025-02-112025-02-112025-03-01Research in International Business and Finance Vol.75 (2025)02755319https://repository.li.mahidol.ac.th/handle/20.500.14594/104200We study the effect of a key external governance mechanism – the takeover market – on dividend policy. We employ a unique measure to assess vulnerability to corporate takeovers derived from the varied enactment of legislation across different states. Using an extensive dataset spanning half a century and all state regulations, we demonstrate that firms more susceptible to takeover threats pay significantly higher dividends. Our results support agency theory, which postulates that the takeover market compels self-serving managers to return more cash to shareholders through higher dividends.Business, Management and AccountingEconomics, Econometrics and FinanceArticleSCOPUS10.1016/j.ribaf.2025.1027742-s2.0-85216626206