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Corporate Governance and Dividend Pay-Out in Continental Europe’s Listed Corporations

Universidade de Évora
Colégio Espírito Santo - Sala 103

23/11/2018 03:30 pm

Ricardo Rodrigues (CEGE – Centre for Management Studies, Lisbon)
J. Augusto Felício (ISEG – Lisbon School of Economics and Management)
Pedro Verga Matos (ISEG – Lisbon School of Economics and Management)

Previous research has focused on the influence of corporate governance on the performance and risk of listed firms, but influence of corporate governance on the dividend pay-out has been scarcely address in recent research. In the context of modern corporations, the separation of roles between shareholders and managers creates the conditions for divergence of interests leading to agency costs and, consequently, implies the need to implement governance mechanisms to minimize those costs and protect the shareholders’ interests that, among others, include the entitlement to receive dividends proportionally to their shareholdings.

In this research, focusing on listed corporations with headquarters in Continental Europe countries, we study the influence of a large set of governance mechanisms in the dividend pay-outs over a period of 12 years. The results support the importance of governance mechanisms towards the protection of shareholders’ interests and reveal that there are relevant differences when the analysis is limited to dividend paying corporations, which implies that the decisions on whether to pay or not dividends and how much to pay are grounded on different antecedents.

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