Title: Corporate Payout Policy and Product Market Competition
Abstract: This paper shows that firms in more competitive industries pay higher dividends than do firms in less competitive markets. We establish a causal link by showing that an exogenous increase in competition due to large tariff reductions leads to higher dividend payout ratios. Further tests, including a shock to managerial entrenchment, indicate that agency considerations are a plausible channel for the negative effect of concentration levels on dividend payouts. Overall, our findings are consistent with two notions: One, the disciplinary forces of competition induce managers to pay out excess cash; and two, dividends are an outcome of external governance factors.
Publication Year: 2007
Publication Date: 2007-01-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 109
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