Abstract
We study the effect of a country's political freedom status on corporate payouts around the world. In both OLS and two-stage regressions, we find that firms in less free countries pay out more cash, suggesting that low political freedom is associated with a less friendly investment environment. Consistent with this view, we further find that firms reduce payouts when a country's political freedom status improves, while they tend to pay out past excess cash and cut future investment in the face of a deterioration in political freedom. In additional analysis, we also find that firms in less free countries do not pay out cash mainly to ease agency concerns: cash payouts in these countries are more volatile and hence less valuable.
Original language | English |
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Pages (from-to) | 514-529 |
Number of pages | 16 |
Journal | Journal of Corporate Finance |
Volume | 43 |
DOIs | |
Publication status | Published - 1 Apr 2017 |
Scopus Subject Areas
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management
User-Defined Keywords
- Freedom
- Payout policy
- Political institutions