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Abstract
Dividends are not only a signal about a firm’s prospects under asymmetric information, but they can also act as a corporate governance device to align the management’s interests with those of the shareholders. Dividend Policy and Corporate Governance is the first comprehensive volume on the relationship between dividend policy and corporate governance, and examines in detail empirical studies and current theories.
Reviewing the interactions between dividend policy and other corporate governance mechanisms, it compares results for the UK and the US with those for other countries such as France, Germany, and Japan, and provides new empirical evidence on corporate governance in continental Europe and its impact on dividends. Focusing on one of the main representatives of this system, Germany, it highlights major differences between the dividend policies of German firms and those of UK or US firms. Conventional wisdom states that German dividends are lower than UK or US dividends, yet on a published-profits basis the exact converse is true. In addition, the authors demonstrate a link between corporate control structures and dividend payouts, report evidence that the existence of a loss is an additional determinant of dividend changes, and demonstrate that the tax status of the controlling shareholder and the firm’s dividend payout are not linked. The conclusions reached in this book have important implications for the current debate on corporate governance, making it invaluable for academics, finance professionals, regulators, and legal advisors.
Recommendations
Messrs. Correia, Goergen & Renneboog push beyond the usual empirical look at American firms’ dividend policies, using comparative analysis, mostly of German results, to seek to move us forward in understanding the puzzle. A highly recommended book.’ Mark Roe, Harvard Law School, Harvard University
‘Much of what is known about the dividend policy of firms concerns US and UK companies. This book is the first to explore this topic systematically for companies based in continental Europe and particularly in Germany. It uncovers several new and often surprising empirical regularities, often in sharp contrast with those emerging from the US and UK evidence, and relates them to the patterns of ownership and control. The breadth and novelty of the analysis will make this book a leading reference in the analysis of the dividend policy of corporations.’ Marco Pagano, University of Naples Federico II and CEPR
‘This book provides valuable new evidence on dividend policy and its links with corporate control in continental Europe, and in particular Germany, bringing into focus the similarities and differences with dividend policy in the US and the UK. At the same time, the book provides an insightful overview of the current state of theory and evidence relating to dividend policy and corporate governance. An important and timely contribution.’ Ailsa Röell, Bendheim Center for Finance, Princeton University and CEPR
‘Although dividend policy and corporate governance are two of the most researched areas in financial economics, little is known about the interaction between these areas. This insightful and well-documented book provides a thorough analysis of the linkages between dividends and governance. This book will surely be of interest to academics and practitioners in finance, economics and law.’ Ekkehart Boehmer, Texas A&M University
‘Dividend Policy and Corporate Governance is a much needed addition to the finance literature. The book not only presents a thorough review of the dividend and corporate governance literature, but it also presents new, important empirical insights on the dividend policy of firms that operate outside the Anglo-American system of corporate governance.’ Julian Franks, London Business School and CEPR
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