Mandatory dividend and corporate investment: a multi-country analysis
DOI:
https://doi.org/10.1108/RAUSP-05-2019-0113Keywords:
Mandatory dividend, Corporate investment, Financial restrictionAbstract
Purpose – This paper aims to empirically verify the impact of the mandatory dividend law on the investment of publicly traded companies.
Design/methodology/approach – The sample includes 212,595 observations from publicly traded companies from 47 different countries over the period from 2000 to 2016. The authors estimated a regression model by panel data methods to show the impact of the mandatory dividend on firm’s investment, more specifically in their sensitivities of investment to cash flow and to growth opportunities. In addition, the average treatment effect on the treated was estimated through sample matching.
Findings – The results indicate that the mandatory dividend have a direct and indirect impact on corporate investment.
Originality/value – Legislators and economic agents can use the results of the present research to evaluate the continuity or implementation of this legal mechanism (mandatory dividend) to evaluate economic moments favorable to its use or to create different legal rules to smooth the impact of this mechanism on the investment of companies.
Downloads
References
Almeida, H., & Campello, M. (2007). Financial constraints, asset tangibility, and corporate investment. Review of Financial Studies, 20, 1429–1460. doi: 10.1093/rfs/hhm019.
Almeida, H., Campello, M., & Weisbach, M. S. (2004). The cash flow sensitivity of cash. The Journal of Finance, 59, 1777–1804. doi: 10.1111/j.1540-6261.2004.00679.x.
Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do us firms hold so much more cash than they used to?. The Journal of Finance, 64, 1985–2021. doi: 10.1111/j.1540-6261.2009.01492.x.
Campello, M., Graham, J. R., & Harvey, C. R. (2010). The real effects of financial constraints: Evidence from a financial crisis. Journal of Financial Economics, 97, 470–487. doi: 10.1016/j.jfineco.2010.02.009.
Carpenter, R. E., & Guariglia, A. (2008). Cash flow, investment, and investment opportunities: New tests using uk panel data. Journal of Banking & Finance, 32, 1894–1906. doi: 10.1016/j.jbankfin.2007.12.014.
Coelho, F. U. (2002). Curso de direito comercial. [S.l.]. Saraiva, v. 1,
Fazzari, S., Hubbard, R. G., & Petersen, B. (1988). Investment, financing decisions, and tax policy. The American Economic Review, 1, 200–205.
Gilchrist, S., & Himmelberg, C. P. (1995). Evidence on the role of cash flow for investment. Journal of Monetary Economics, 36, 541–572. doi: 10.1016/0304-3932(95)01223-0.
Jensen, M. C. (1986). Agency cost of free cash flow, corporate finance, and takeovers. Corporate finance, and takeovers. American Economic Review, 76
Laporta, R., Florencio, L. D. S., & Shleifer, A. (1998). Law and finance. Journal of Political Economy, 106, 1113–1155.
Laporta, R., Florencio, L. D. S., Shleifer, A., & Vishny, R. W. (2000). Agency problems and dividend policies around the world. The Journal of Finance, 55, 1–33.
Lusk, E. J., Halperin, M., & Heiling, F. (2011). A note of power differentials in data preparation between trimming and winsorizing. Business Management Dynamics, 1, 23–31.
Mclean, R. D., Zhang, T., & Zhao, M. (2012). Why does the law matter? Investor protection and its effects on investment, finance, and growth. The Journal of Finance, 67, 313–350. doi: 10.1111/j.1540-6261.2011.01713.x.
Martins, T. C., & Novaes, W. (2012). Mandatory dividend rules: Do they make it harder for firms to invest?. Journal of Corporate Finance, 18, 953–967. doi: 10.1016/j.jcorpfin.2012.05.002.
Rosenbaum, P. R., & Rubin, D. B. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70, 41–55. doi: 10.1093/biomet/70.1.41.
Vancin, D. F. (2018). Investimento, Distribuição de Lucro e Regulação: o impacto do dividendo obrigatório no investimento corporativo. Tese (Doutorado) — PPGA/UFRGS,
Downloads
Published
Issue
Section
License
Copyright (c) 2021 Daniel Vancin, Guilherme Kirch
This work is licensed under a Creative Commons Attribution 4.0 International License.
Management Department of the School of Economics, Management and Accounting of the University of São Paulo.
The publication of article segments is allowed, subject to prior authorization and source identification.
Copyright is regulated under Licença Creative Commons Attribution
