Mandatory dividend and corporate investment: a multi-country analysis

Abstract

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.

Keywords

• mandatory dividend
• corporate investment
• financial restriction