Prague Economic Papers 2021, 30(1):90-114 | DOI: 10.18267/j.pep.758

Does Social Progress Explain the Dividend Payout Decision?

Hanaan Yaseen ORCID...a
a Bucharest University of Economic Studies, Doctoral School of Finance and Center of Financial and Monetary Research (CEFIMO), Bucharest, Romania

This paper investigates whether national social progress influences dividend payout policy of companies around the world. Using a large database of 12,312 companies from 70 countries, for 7 years (2008-2014), I provide strong evidence that social progress is significant in relation to important corporate decisions on paying dividends. Dividend payout policy is explained by the social progress of the country in which the company is active. Access to higher education, satisfaction of basic human needs, overall wellbeing and opportunities positively influence the dividend payout ratio and the propensity to pay dividends. Moreover, the Social Progress Index may be more significant than GDP per capita in relation to dividend policy. Hence, the new measure of quantifying the population's standard of living, from the social perspective and not from the economic one, is more relevant in the decision-making process on dividend payout.

JEL classification: D90, G35, G40

Received: October 7, 2019; Revised: April 30, 2020; Accepted: June 18, 2020; Prepublished online: September 9, 2020; Published: February 4, 2021  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Yaseen, H. (2021). Does Social Progress Explain the Dividend Payout Decision? Prague Economic Papers, 30(1), 90-114. doi: 10.18267/j.pep.758
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Ackhil, G., Ferguson, J. (1992). Beyond "Culture": Space, Identity, and the Politics of Difference. Cultural Anthropology, 7(1), 6-23, https://doi.org/10.1525/can.1992.7.1.02a00020 Go to original source...
    2. Aivazian, V., Booth, L., Cleary, L. S. (2003). Do Emerging Market Firms Follow Different Dividend Policies From U.S. Firms? The Journal of Financial Research, 26(3), 371-387, https://doi.org/10.1111/1475-6803.00064 Go to original source...
    3. Bae, S., Chang, K., Kang, E. (2012). Culture, Corporate Governance and Dividend Policy: International Evidence. Journal of Financial Research, 35(2), 289-316, https://doi.org/10.1111/j.1475-6803.2012.01318.x Go to original source...
    4. Baker, H. K., Singleton, J. C., Veit, E. T. (2011). Survey Research in Corporate Finance - Bridging the Gap between Theory and Practice. New York, NY: Oxford University Press, https://doi.org/10.1093/acprof:oso/9780195340372.001.0001 Go to original source...
    5. Benartzi, S., Michaely, R., Thaler, R. (1997). Do Changes in Dividends Signal the Future or the Past? Journal of Finance, 52(3), 1007-1034, https://doi.org/10.1111/j.1540-6261.1997.tb02723.x Go to original source...
    6. Bhattacharya, S. (1979). Imperfect Information, Dividend Policy, and the Bird in Hand Fallacy. The Bell Journal of Economics, 10(1), 259-270, https://doi.org/10.2307/3003330 Go to original source...
    7. Brav, A., Graham, J. R., Harvey, C. R., et al. (2005). Payout Policy in the 21st Century. Journal of Financial Economics, 77(3), 483-527, https://doi.org/10.1016/j.jfineco.2004.07.004 Go to original source...
    8. Brockman, P. Unlu, E. (2009). Dividend Policy, Creditor Rights, and the Agency Costs of Debt. Journal of Financial Economics, 92(2), 276-299, https://doi.org/10.1016/j.jfineco.2008.03.007 Go to original source...
    9. Chen, J., Woon, S. L., Marc, G. (2017). The Impact of Board Gender Composition on Dividend Payout. Journal of Corporate Finance, 43, 86-105, https://doi.org/10.1016/j.jcorpfin.2017.01.001 Go to original source...
    10. DeAngelo, H., DeAngelo, L., Skinner, D. J. (1996). Reversal of Fortune: Dividend Signaling and the Disappearance of Sustained Earnings Growth. Journal of Financial Economics, 40(3), 341-371, https://doi.org/10.1016/0304-405X(95)00850-E Go to original source...
    11. DeAngelo, H., DeAngelo, L., Skinner, D. J. (2008). Corporate Payout Policy. Foundations and Trends in Finance, 3(2/3), 95-287, https://doi.org/10.1108/MF-03-2014-0077 Go to original source...
    12. Denis, D., Osobov, I. (2008). Why do Firms Pay Dividend? International Evidence on the Determinants of Dividend Policy. Journal of Financial Economics, 89, https://doi.org/10.1016/j.jfineco.2007.06.006 Go to original source...
    13. Dipietro, W. R., Anoruo, E. (2006). GDP Per Capita and its Challengers as Measures of Happiness. International Journal of Social Economics, 33(10), 698-709, https://doi.org/10.1108/03068290610689732 Go to original source...
    14. Dragotã, V. (2003). Politica de dividend. O abordare in contextul mediului economic din Romania. Ed. All Beck, ISBN 973-655-383-3.
    15. Dragotã, M., Dragotã, V., Þâþu, L., et al. (2009). Income Taxation Regulation and Companies' Behaviour: Is the Romanian Companies' Dividend Policy Influenced by the Changes in Income Taxation? Romanian Journal of Economic Forecasting, 6(1), 76-93.
    16. Dragotã, V., Pele, D. T., Yaseen, H. (2019). Dividend Payout Ratio follows a Tweedie Distribution: international evidence. Economics: The Open-Access, Open-Assessment E-Journal, 13 (2019-45): 1-34. http://www.economics-ejournal.org/economics/journalarticles/2019-45 Go to original source...
    17. Dragota, V., Yaseen, H. (forthcoming). Egalitarianism and Hierarchy in Dividend Policy. Paper presented within FIBA conference, 28-29th of March 2019, at The Bucharest University of Economic Studies.
    18. Easterbrook, F. (1984). Two Agency-cost Explanations of Dividends. American Economic Review, 74, 650-659. Available at: https://www.jstor.org/stable/1805130
    19. England, R. W. (1998). Analysis: Measurement of Social Well-being: Alternatives to Gross Domestic Product. Ecological Economics, 25(1), 89-103, https://doi.org/10.1016/s0921-8009(97)00098-0 Go to original source...
    20. Fama, E. F., French, K. R. (2001). Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay? Journal of Financial Economics, 60, 3-40. Go to original source...
    21. Fidrmuc, J., Jacob, M. (2010). Culture, Agency Cost and Dividends. Journal of Comparative Economics, 38(3), 321-339, https://doi.org/10.1016/j.jce.2010.04.002 Go to original source...
    22. Fleurbaey, M., Blanchet, D. (2013). Beyond GDP: Measuring Welfare and Assessing Sustainability. Oxford University Press. ISBN 9780199767199.Social Indicators Research, 87(1), 1-25, https://doi.org/10.1007/s11205-007-9158-7 Go to original source...
    23. Guiso, L., Sapienza, P., Zingales, L. (2006). Does Culture Affect Economic Outcomes? The Journal of Economic Perspectives, 20(2), 23-48, https://doi.org/10.1257/jep.20.2.23 Go to original source...
    24. Hahn, A., R., Inborn, M. (2009). Anthropology and Public Health: Bridging Differences in Culture and Society. Published to Oxford Scholarship Online, https://doi.org/10.1093/acprof:oso/9780195374643.001.0001 Go to original source...
    25. Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. American Economic Review, 76(2), 323-329. Available at: https://sfinm.files.wordpress.com/2013/10/agency-costs-of-fcf-jensen.pdf
    26. La Porta, R., Lopez-de-Silanes, F., Shleifer, A., et al. (2000). Agency Problems and Dividend Policies around the World. Journal of Finance, 55(1), 1-33, https://doi.org/10.1111/0022-1082.00199 Go to original source...
    27. La Porta, R., Lopez-de-Silanes, F., Shleifer, A. (2008). The Economic Consequences of Legal Origins. Journal of Economic Literature, 46(2), 285-332. Available at: http://scholar.harvard.edu/shleifer/publications/economic-consequences-legal-origins Go to original source...
    28. Lintner, J. (1962). Dividends, Earnings, Leverage, Stock Prices and the Supply of Capital to Corporations. The Review of Economics and Statistics, 44(3), 243-269, https://doi.org/10.2307/1926397 Go to original source...
    29. Miller, M. H., Modigliani, F. (1961). Dividend Policy, Grow and the Valuation of Share. The Journal of Business, 34(4), 411-433, https://doi.org/10.1086/294442 Go to original source...
    30. Miller, M. H., Rock, K. (1985). Dividend Policy under Asymmetric Information. Journal of Finance, 40(4), 1031-1052, https://doi.org/10.1111/j.1540-6261.1985.tb02362.x Go to original source...
    31. Shao, Y., Kwok, C., Guedhami, O. (2010). National Culture and Dividend Policy. Journal of International Business Studies, 41(8), 1391-1414, https://doi.org/10.1057/jibs.2009.74 Go to original source...
    32. Yaseen, H. (2018). Dividend Policy and Socio-Cultural Factors: Some Preliminary Findings. The Review of Finance and Banking, 10 (2), 077-094
    33. Yaseen, H. (2019). Dividend Policy Explained by Country's Standards of Living: An International Evidence, in Procházka, D., ed., Global Versus Local Perspectives on Finance and Accounting. Cham: ACFA2018, Springer Proceedings in Business and Economics, 125-134, https://doi.org/10.1007/978-3-030-11851-8_12 Go to original source...
    34. Yaseen, H., Dragotã, V. (2019). Harmony, Hierarchy and Dividend Policy around the World, in Procházka, D., ed., Global Versus Local Perspectives on Finance and Accounting. Cham: ACFA2018 2, Springer Proceedings in Business and Economics. Springer, pp. 115-124, https://doi.org/10.1007/978-3-030-11851-8_11 Go to original source...
    35. https://www.socialprogress.org/https://data.worldbank.org/indicator/SI.POV.GINI/

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content