Corruption, Agency Costs and Dividend Policy - International Evidence

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QUAECO-1303; No. of Pages 10 ARTICLE IN PRESS

The Quarterly Review of Economics and Finance xxx (2019) xxx–xxx
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The Quarterly Review of Economics and Finance

journal homepage: www.elsevier.com/locate/qref
Corruption, agency costs and dividend policy: International evidence

Quoc Trung Tran
Foreign Trade University, Ho Chi Minh City Campus, 15 D5 Street, Ward 25, Binh Thanh District, Ho Chi Minh City, Vietnam
a r t i c l e i n f o a b s t r a c t
Article history: In this paper, we argue that corruption is likely to increase agency costs of equity, hence shareholders
Received 25 January 2019 have higher incentives to control managers. When corruption is higher, firm managers need to use firm
Received in revised form 23 July 2019 resources to make unofficial payments and they tend to take this opportunity to expropriate shareholders.
Accepted 10 September 2019
Consequently, shareholders recognizing this risk need to force managers to pay more dividends in order
Available online xxx
to mitigate the agency problem. This paper examines the effects of corruption on dividend decisions
in the light of agency theory. With a sample of 205,316 observations from 47 countries, we find that
JEL classification:
corruption is positively related to both the decision to pay dividends and payout ratio. Moreover, this
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relationship is stronger under strong creditor protection.
Keywords: © 2019 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.
Corruption
Agency costs
Dividend policy
Grease money
Protection money
1. Introduction mance and product innovation but its impact on firm performance
is rather mixed.
Corruption is defined as using public power to serve private Although the value of a bribery dollar is likely to be higher or
interest. The extant literature shows that corruption affects invest- lower than a dollar of profit, corruption may lead to an increase in
ment negatively at the macro level; hence, economic growth and agency costs of equity and thus shareholders have high incentives
development are dampened (Ahlin & Pang, 2008; Doh & Teegen, to control firm managers. In a higher corruption environment, firm
2003; Lambsdorff & Cornelius, 2000; Mauro, 1995; Méndez & managers are more flexible to use firm resources for making unof-
Sepúlveda, 2006). However, the effect of corruption on economic ficial payments to public sector staff or agencies. Therefore, they
efficiency is mixed at the micro level. On one hand, corruption may exploit this opportunity to expropriate shareholders by using
positively affects firm performance through “grease money” mech- cash to invest in unprofitable projects that serve their own interest.
anism and “protection money” mechanism. The former states Recognizing this risk, shareholders tend to create more pressure on
that firms paying off functionaries to obtain better public service managers to disgorge cash by paying dividends. This paper investi-
(e.g. less red tape and better access to scarce resources) (Wei & gates how corruption affects dividend policy across countries in the
Kaufmann, 1999). The latter asserts that bribery can function to light of the agency problem mechanism. We measure corruption
reduce the risks of state predation (e.g. property right protection based on Corruption Perception Index and Control of Corruption
and tax reduction) (Xu, Zhang, & Yano, 2017). Supporting evidence Index annually published by Transparency International and World
for the two mechanisms is documented in Uganda (Svensson, 2003) Bank respectively.
and China (Cai, Fang, & Xu, 2004; Wang & You, 2012). On the other We use both Logit and Tobit models to examine the effects of
hand, Nguyen and Van Dijk (2012) investigate the impact of cor- corruption on the decision to pay dividends and dividend payout
ruption on firm growth in Vietnam’s private sector and find that ratio respectively. Control variables include firm characteristics (i.e.
corruption is negatively related to firm growth. Sharma and Mitra firm profitability, cash holdings, firm growth, financial leverage,
(2015) show that bribing is positively related to export perfor- firm size, asset tangibility, firm maturity and business uncertainty)
and country-level variables (i.e. shareholder protection, creditor
protection, economic growth and national culture). Using a sam-
ple of 205, 316 firm-years from 29,847 firms incorporated in 47
E-mail address: tranquoctrung.cs2@ftu.edu.vn
https://doi.org/10.1016/j.qref.2019.09.010
1062-9769/© 2019 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.
Please cite this article in press as: Tran, Q.T. Corruption, agency costs and dividend policy: International evidence. The Quarterly Review
of Economics and Finance (2019), https://doi.org/10.1016/j.qref.2019.09.010
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2 Q.T. Tran / The Quarterly Review of Economics and Finance xxx (2019) xxx–xxx
countries, we find that firms tend to pay more dividends when Wang and You (2012) show that bribery payment is positively cor-
corruption is more severe. In addition, according to Brockman and related with firm growth in Uganda and China. On the other hand,
Unlu (2009) and Shao, Kwok, and Guedhami (2013) firms tend to examining the effect of corruption on firm growth in Vietnam with
balance creditor rights and shareholder rights. Shareholder rights a sample including 741 private firms and 133 state-owned firms,
are more effective in dividend policy when creditors are adequately Nguyen and Van Dijk (2012) find that corruption is detrimental
protected. Therefore, we argue that under strong creditor protec- for growth of private firms and this relationship is not significant
tion, managers are more likely to satisfy shareholders’ demand for in the sub-sample of state-owned firms. Based on the World Bank
dividends as a means to reduce agency costs associated with cor- database of enterprises surveys, Sharma and Mitra (2015) show
ruption environment. Accordingly, we investigate the impacts of that the impact of bribe payment on firm performance is rather
corruption on dividend decisions by creditor protection. We use the mixed although bribing is positively associated with export perfor-
median value of creditor protection index from Djankov, McLiesh mance and product innovation.
and Shleifer (2007) as a criterion to divide the full research sam- Despite mixed evidence for the relationship between corrup-
ple into two sub-samples of strong and weak creditor protection. tion and firm growth in prior studies, we argue that a corruption
After comparing the regression results of the two sub-samples, we environment is a good opportunity to investigate how corrup-
find that the relationship between corruption and dividend pol- tion affects corporate dividend policy. According to Jensen and
icy is stronger in countries of strong creditor rights. Moreover, our Meckling (1976), managers tend to use firm resources for their
robustness checks with a reduced sample (US, Japan, China, India, own benefits instead of maximizing owners’ wealth since corporate
Taiwan and UK are excluded) and other measures of payout ratio ownership and control are separated. Consequently, sharehold-
provide consistent results. ers are likely to force managers to pay dividends as a means to
The remaining of this paper includes Section 2 – Literature reduce excessive cash which managers can use to fund unprofitable
review and hypothesis development, Section 3 – Research design, projects (Jensen, 1986; Rozeff, 1982). In a corruption environment,
Section 4 – Research results, Section 5 – Robustness checks and managers need more free cash flows available to make unofficial
Section 6 – Conclusion. payments (Pinkowitz, Stulz, & Williamson, 2003). Recently, Thakur
and Kannadhasan (2019) also find that cash holdings are positively
related to corruption. When managers are more flexible to use cor-
2. Literature review and hypothesis development porate cash, they may take this chance to expropriate shareholders
by diverting cash into unprofitable projects that serve their own
Corruption is the acts of exploiting public power and position to interest. Recognizing this agency problem, shareholders have high
gain personal interest in a way breaking the rules of the game (Jain, incentives to force managers to pay dividends as a mechanism to
2001). Corruption is committed by public officials and politicians reduce agency costs. Therefore, we hypothesize that corruption
who control public power. Main causes of corruption documented positively affects dividend policy.
in prior studies include level of rents and market structure (Ades
H1. Corruption is positively related to both the decision to pay
& Di Tella, 1999); legal (in)effectiveness (Herzfeld & Weiss, 2003);
dividends and payout ratio.
legal, political and socio-economic characteristics (Paldam, 2002;
Treisman, 2000) and quality of institutions (Acemoglu, Johnson, & In addition, Shao et al. (2013) posit that firm managers tend
Robinson, 2001). From macroeconomic perspective, several stud- to balance shareholder and creditor rights since dividends reduce
ies find that corruption tends to harm economic efficiency. In a agency costs of equity but increase agency costs of debt. Firm man-
pioneering research, Mauro (1995) finds a negative impact of cor- agers are more likely to use dividend policy to serve shareholders
ruption on investment which, in turn, decreases national economic (creditors) if creditors (shareholders) are strongly protected by law.
growth. Brunetti, Kisunko and Weder (1998), Doh and Teegen With a sample of 39 countries over the period from 1991 to 2010,
(2003) and Zakharov (2018) also report that high corruption is they find that dividends are more positively related to creditor
one of the most detrimental for investment. Investigating corrup- (shareholder) protection in countries of strong shareholders (cred-
tion across 26 African countries, Lambsdorff and Cornelius (2000) itors) protection. Therefore, we argue that in when creditor rights
find supporting evidence for the negative association between are strong, shareholders are more effective in reducing agency costs
corruption and economic performance at the macro level (i.e. eco- that may arise from cash reserved for paying bribes.
nomic growth and FDI). Méndez and Sepúlveda (2006) examine the
impact of corruption on long-run economic growth under different H2. The positive relationship between corruption and dividend
measures of political freedom across 130 countries. Their research policy is stronger in countries of strong creditor protection.
findings show that there is a non-monotonic relationship between
corruption and economic growth in free countries after controlling 3. Research methods
many other economic variables.
Although many previous empirical studies show that corrup- 3.1. Research models
tion dampens economic growth from macroeconomic perspective,
the relationship between corruption and firm performance is a In order to investigate the impact of corruption on dividend pol-
debatable topic. On one hand, corruption tends to have a positive icy, we develop both Logit and Tobit models in which the decision to
effect on firm performance through two channels namely “grease pay dividends and dividend payout ratio are employed as depen-
money” and “protection money” (Xu et al., 2017). With “grease dent variables respectively (Brockman & Unlu, 2009; Shao et al.,
money” channel, firms bribe public officials or agencies to miti- 2013; Tran, Alphonse, & Nguyen, 2017). In line with prior studies
gate red tape and have better access to scarce resources (Wei & on dividend payment across countries, we control both firm-level
Kaufmann, 1999). With “protection money” channel, bribery helps and country-level variables.
firms decrease the risks of state predation (e.g. firms’ property right DTP = ˛ + ˇ1 PRO + ˇ2 CAH + ˇ3 FGR + ˇ4 LEV + ˇ5 SIZ + ˇ6 ATG
are protected effectively and their tax rates are lowered). Cai et al.
(2004) use entertainment and travel costs in Chinese firms to mea- +ˇ7 REA + ˇ8 SSA + ˇ9 COI + ˇ10 ADI + ˇ11 CRI + ˇ12 CIV + ˇ13 EGR
sure corruption and find that some components of entertainment
+ˇ14 UAC + ε (1)
and travel costs create significant positive returns in spite of their
overall negative impact on firm productivity. Svensson (2003) and
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Q.T. Tran / The Quarterly Review of Economics and Finance xxx (2019) xxx–xxx 3
DPR = ˛ + ˇ1 PRO + ˇ2 CAH + ˇ3 FGR + ˇ4 LEV + ˇ5 SIZ + ˇ6 ATG DPR = ␣ + ␤1PRO + ␤2CAH + ␤3FGR + ␤4LEV + ␤5SIZ + ␤6ATG
+ˇ7 REA + ˇ8 SSA + ˇ9 COI + ˇ10 ADI + ˇ11 CRI + ˇ12 CIV + ˇ13 EGR +␤7REA + ␤8SSA + ␤9COI + ␤10ADI + ␤11CIV + ␤12EGR
+ˇ14 UAC + ε (2) +␤13UAC + ␸Industrydummies + ␩Yeardummies
Where: DTP is the decision to pay dividends, it is assigned 1 for +␪Countrydummies + ␧ (4)
payers and 0 otherwise. DPR is dividend payout ratio measured by
total cash dividends scaled by net sales. We use net sales as a defla-
tor instead of earnings to calculate payout ratio since low earnings We control both industry and time effects in all regression
make this ratio unstable (Aivazian, Booth, & Cleary, 2003). PRO is models with dummy variables. In addition, we also use country
firm profitability calculated by return on assets ratio. CAH is cash dummies to mitigate the bias that may be caused by country-level
holdings measured by cash balance scaled by total assets. FGR is omitted variables. All regression models clustered by firm to con-
firm growth measured by annual growth rate of total assets. LEV trol within-firm correlated residuals. Dividend payout ratio and
is firm leverage proxied by long-term debt to total assets ratio. SIZ firm characteristics are winsorized at 1%2 to eliminate the effect
is firm size measured by the natural logarithm of total assets. ATG of outliers.
is asset tangibility measured by net property, plant and equipment
deflated by total assets. REA is firm maturity measured by retained 3.2. Research data
earnings to total assets ratio. SSA is the five year standard devia-
tion of net sales to assets. Wei (1997) found that corruption may The research data is collected from the Compustat database
create its impact through uncertainty; therefore, we use SSA to con- including firms incorporated in all countries in the world. To meet
trol the effect of uncertainty on dividend policy. COI is corruption the requirements for subsequent analysis, we eliminate the fol-
index. We use Corruption Perception Index (CPI) and Control of lowing firm-year observations: (1) firms incorporated in countries
Corruption Index (CCI) annually provided by Transparency Inter- with mandatory dividend payment namely Brazil, Chile, Colombia,
national and World Bank respectively to calculate COI. CPI’s scale Greece, and Venezuela (La Porta, Lopez-de-Silanes, Shleifer, &
ranged from 0 to 10 before 2012 but it is replaced by the 0–100 Vishny, 2000); (2) firms classified into utilities industry with SIC
scale from 2012. CCI originally ranges from -2.5 to 2.5. Lower val- codes from 4900 to 4999 and financial sector with SIC codes from
ues of CPI and CCI represent higher corruption. Therefore, in line 6000 to 6999; (3) firms without consolidated financial reports; (4)
with Swaleheen (2011) and Thakur and Kannadhasan (2019) we firms having different issues of common equity; (5) firm-years with
rescale and reverse both CPI and CCI to obtain two new corruption incomplete or missing data, (6) observations containing abnormal
indices (COI) ranging from 0 to 10. Higher values of COI indicate information (i.e. net income/book equity/total assets is negative or
higher corruption. ADI is the Anti-self-dealing Index representing total assets are smaller than dividend amount). Consequently, we
shareholder rights provided by Djankov, La Porta, Lopez-de-Silanes have a final research sample with 205,316 firm-years from 29,847
and Shleifer (2008). CRI is the Revised Creditor Right Aggregate firms incorporated in 47 countries over the period from 2002 to
Score representing creditor protection provided by Djankov et al. 2015.
(2007). CIV is a dummy variable assigned 1 for civil law coun- Table 1 presents a summary of the research sample. Panel A
tries and 0 otherwise. EGR is annual economic growth measured shows descriptive statistics of firm characteristics. Payers account
by the growth rate of Gross Domestic Product collected from the for 69,5% of total firm-year observations in the data. On average,
World Bank database. UAC is national culture measured by uncer- dividends constitute 2.5% of sales revenue. Both paying proportion
tainty avoidance index provided by Hofstede, Hofstede, and Minkov and payout ratio in this study are higher than those in Brockman
(2010)1 . and Unlu (2009) and Shao et al. (2013). The distribution of firm-
Moreover, we split the research sample into 2 sub-samples level variables reflected by the values of mean, median, standard
by the median value of creditor protection index to compare deviation and percentiles implies no selection bias. Panel B shows
the effects of corruption on dividend decisions between strong that the number of firms increases significantly over the period
creditor protection (countries with CRI higher than the sam- from 2002 (9,715 firms) to 2007 (15,478 firms). However, this figure
ple median) and weak creditor protection (countries with CRI drops rapidly to 13,581 firms in the year 2008 since many firms are
equal to or lower than the sample median). Then, we run delisted under the impact of the global financial crisis. It starts to
Logit and Tobit regression models described by two Eqs. (3) recover in the year 2009 with 14,433 and varies from 16,000 to
and (4) for each sub-sample and compare the coefficients of 16,500 over the period from 2010 to 2015.
COI between these two sub-samples to test the hypothesis H2 . Panel C reports the distribution of the research sample by 2-
digit SIC industry. In line with prior studies, Manufacturing contains
the largest number of observations at 117,892, followed by Service
DTP = ␣ + ␤1PRO + ␤2CAH + ␤3FGR + ␤4LEV + ␤5SIZ + ␤6ATG (34,686). Construction has the smallest amount with only 7,319.
+␤7REA + ␤8SSA + ␤9COI + ␤10ADI + ␤11CIV + ␤12EGR Each of the industries including Wholesale trade, Retail trade and
Transportation, communications have from 11,000 to 13,000 firm-
+␤13UAC + ␸Industrydummies + ␩Yeardummies years.
Panel D describes country-specific data. Number of observations
+␪Countrydummies + ␧ (3)
varies significantly across 47 countries. Six countries including UK,
India, US, China, Japan and Taiwan constitute 57.2% of the full
research sample. This selection problem exists regardless of data
source. Therefore, we apply all regression models with a reduced
1
Bae, Chang and Kang (2012) posit that three culture dimensions namely uncer- sample without these six countries to check whether our research
tainty avoidance, masculinity and long-term orientation should not be present in
a regression model since they are highly correlated to each other. In this study,
we replace uncertainty avoidance with masculinity and long-term orientation in all
2
regression models as robustness tests and find that national culture fails to affect We also winsorize firm-level variables at 3% and 5% and find consistent research
our key research findings. results.
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Table 1
Description of research sample.
Mean Median SD 1st quartile 3rd quartile Min Max
Panel A. Firm-specific data

DTP 0.695 1.000 0.460 0.000 1.000 0.000 1.000
DPR 0.025 0.008 0.044 0.000 0.031 0.000 0.265
PRO 0.061 0.046 0.056 0.022 0.083 0.001 0.296
CAH 0.158 0.111 0.152 0.045 0.222 0.001 0.706
FGR 0.159 0.075 0.328 0.002 0.194 −0.274 2.086
LEV 0.105 0.056 0.127 0.000 0.170 0.000 0.545
SIZ 12.316 12.233 1.982 10.995 13.554 7.657 17.492
ATG 0.294 0.260 0.213 0.120 0.429 0.003 0.875
REA 0.157 0.162 0.337 0.047 0.320 −1.791 0.779
SSA 0.176 0.118 0.183 0.064 0.217 0.008 1.089
Panel B. Annual number of firms

Year N Year N Year N Year N
2002 9715 2006 15,315 2010 16,540 2014 16,556
2003 11,410 2007 15,478 2011 16,188 2015 16,072
2004 13,201 2008 13,581 2012 16,014
2005 14,320 2009 14,433 2013 16,493
Panel C. Industry Distribution

Industry 2-digit SIC N Industry 2-digit SIC N
Mineral industries 10-14 9,273 Wholesale trade 50-51 11,395
Construction industries 15-17 7319 Retail trade 52-59 12,070
Manufacturing 20-39 117,892 Service industries >=70 34,686
Transportation, communications 40-48 12,681
Panel D. Country-specific data

Country No. observations No. firms Payer (%) DPR ADI CRI UAC
Common law countries
Argentina 460 57 57.61 0.02 0.34 1 86
Australia 5,671 1,132 66.28 0.04 0.76 3 51
Belgium 800 112 67.50 0.03 0.54 2 94
Canada 5,483 1,152 52.02 0.03 0.64 1 48
United Kingdom 8,884 152 65.96 0.02 0.95 4 35
Hong Kong 1,142 2,978 72.42 0.05 0.96 4 29
India 22,983 61 57.56 0.01 0.58 2 40
Ireland 341 317 51.03 0.01 0.79 1 35
Israel 1,807 33 55.73 0.03 0.73 3 81
Kenya 247 955 81.38 0.04 0.21 4 50
Sri Lanka 1,358 114 77.76 0.03 0.39 2 45
Malaysia 7,182 91 72.75 0.03 0.95 3 36
Nigeria 545 271 77.61 0.04 0.43 4 55
New Zealand 797 683 80.43 0.05 0.95 4 49
Pakistan 1,876 307 81.61 0.03 0.41 1 70
Singapore 4,790 188 70.98 0.04 1.00 3 8
Thailand 3,982 518 83.68 0.05 0.81 2 64
USA 28,362 4,815 41.83 0.01 0.65 1 46
South Africa 2,327 1,527 65.84 0.03 0.81 3 49
Civil law countries

Austria 591 79 73.60 0.02 0 3 70
Switzerland 1,732 2,688 71.54 0.02 0 1 58
China 22,472 70 95.38 0.05 1 2 30
Germany 4,518 133 58.94 0.02 0 3 65
Denmark 846 124 67.49 0.02 0 3 23
Egypt 503 139 78.93 0.07 0 2 80
Spain 832 699 71.75 0.03 0 2 86
Finland 1,056 672 88.16 0.04 0 1 59
France 5,061 383 70.42 0.02 0 0 86
Croatia 427 255 46.14 0.02 0 3 80
Indonesia 2,683 3,552 57.21 0.02 1 2 48
Italy 1,415 113 70.18 0.02 0 2 75
Jordan 760 31 30.13 0.04 0 1 65
Japan 31,025 104 91.64 0.01 0 1 92
South Korea 5,996 50 75.87 0.01 0 3 85
Lithuania 200 177 58.00 0.03 0 2 65
Morocco 318 215 71.38 0.06 1 1 68
Mexico 845 78 58.34 0.03 0 0 82
Netherlands 1,191 155 69.52 0.02 0 3 53
Norway 1,128 503 58.87 0.03 0 2 50
Peru 722 53 65.51 0.05 0 0 87
Philippines 1,146 170 61.61 0.04 0 1 44
Poland 2,886 1,164 40.44 0.02 0 1 93
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Table 1 (Continued)
Mean Median SD 1st quartile 3rd quartile Min Max
Portugal 372 125 68.55 0.03 0 1 104

Russia 767 431 48.63 0.02 0 2 95
Sweden 2,693 205 67.17 0.03 0 1 29
Turkey 1,589 1,731 51.16 0.03 0 2 85
Taiwan 12,505 285 75.09 0.04 1 2 69
DPR is payout ratio. PRO is firm profitability. CAH is cash holdings. LEV is firm leverage. SIZ is firm size. ATG is asset tangibility. REA is retained earnings to total assets ratio.
SSA is the five-year standard deviation of net sales to assets. ADI is the Anti-self-dealing Index provided by Djankov et al. (2008). CRI is the Revised Creditor Right Aggregate
Score provided by Djankov et al. (2007). UAC is uncertainty avoidance index provided by Hofstede, Hofstede, and Minkov (2010)).
Table 2
The effects of corruption on dividend policy.
COI is based on Corruption Perception Index COI is based on Corruption Control Index
Variables
DTP DPR DTP DPR
Intercept −19.4932*** −0.3679*** −19.2099*** −0.3483***

(−37.52) (−28.13) (−36.16) (−26.57)
PRO 5.0237*** 0.2702*** 5.0297*** 0.2703***
(22.96) (43.22) (22.99) (43.24)
CAH −0.2467*** 0.0330*** −0.2441*** 0.0331***
(−2.81) (14.30) (−2.78) (14.36)
FGR −0.5356*** −0.0202*** −0.5342*** −0.0201***
(−24.44) (−31.71) (−24.37) (−31.57)
LEV 0.0257 0.0246*** 0.0318 0.0248***
(0.25) (9.25) (0.31) (9.35)
SIZ 0.4191*** 0.0051*** 0.4188*** 0.0051***
(48.04) (30.52) (48.01) (30.45)
ATG 0.1779*** 0.0104*** 0.1775*** 0.0104***
(2.64) (5.81) (2.63) (5.82)
REA 2.5552*** 0.0371*** 2.5567*** 0.0373***
(33.38) (29.51) (33.38) (29.59)
SSA −0.5461*** −0.0340*** −0.5467*** −0.0339***
(−9.68) (−24.89) (−9.70) (−24.84)
COI 0.0506** 0.0014*** 0.0889*** 0.0040***
(2.10) (2.88) (3.24) (8.88)
ADI 17.7784*** 0.3514*** 17.6045*** 0.3402***
(26.63) (17.27) (26.24) (16.73)
CRI −0.8383*** −0.0172*** −0.8602*** −0.0191***
(−9.52) (−7.80) (−9.74) (−8.65)
CIV 3.8036*** 0.0819*** 3.8504*** 0.0860***
(22.18) (15.30) (22.52) (16.10)
EGR 0.0010 −0.0003*** 0.0025 −0.0002**
(0.28) (−3.64) (0.71) (−2.55)
UAC 0.0417*** 0.0010*** 0.0372*** 0.0007***
(7.67) (7.44) (6.63) (5.15)
Industry dummies Yes Yes Yes Yes
Year dummies Yes Yes Yes Yes
Country dummies Yes Yes Yes Yes
No. of observations 205,316 205,316 205,316 205,316
Left-censored 62,520 62,520
DTP is the decision to pay dividends assigned 1 for payers and 0 otherwise. DPR is payout ratio. PRO is firm profitability. CAH is cash holdings. FGR is firm growth. LEV is firm
leverage. ATG is asset tangibility. REA is retained earnings to total assets ratio. SSA is the five-year standard deviation of net sales to assets. COI is corruption index. Higher
values of COI indicate higher corruption. ADI is the Anti-self-dealing Index provided by Djankov et al. (2008). CRI is the Revised Creditor Right Aggregate Score provided by
Djankov et al. (2007). CIV is a dummy variable assigned 1 for civil law countries and 0 otherwise. EGR is annual GDP growth rate. UAC is uncertainty avoidance index provided
by Hofstede et al. (2010). Z-statistics and t-statistics are in parentheses. *** is 1% of significance. ** is 5% of significance. * is 10% of significance.
findings are affected by the selection bias. Moreover, country-level to increase since managers have more cash available for bribing.
variables including Anti-self-dealing Index, Revised Creditor Right Understanding this behavior, shareholders have higher incentives
Aggregate Score and national culture (Panel D); Corruption Percep- to force managers to pay more dividends in order to mitigate this
tion Index and Corruption Control Index (Table A1 and Table A2 in agency problem.
Appendix A) vary considerably across 47 countries. This variation In addition, in line with many previous studies (Brockman &
is convenient for analyzing their impacts on dividend policy. Unlu, 2009; Fama & French, 2001), we find a positive correlation
between firm profitability and corporate payout policy. The impact
of cash holdings on dividend payment is mixed since two firms
4. Research results with high cash holdings may have opposite dividend decisions: a
firm pays more dividends to reduce cash while the other restricts
Table 2 shows both Logit and Tobit regression results to analyze dividends to save cash for future investment. The negative relation-
the relationship between corruption and dividend policy. Cor- ship between firm growth and dividend payment also indicates
ruption indices based on both Corruption Perception Index and that firms with more investment opportunities tend to constrain
Corruption Control Index are positively related to the decision to dividend payment (Denis & Osobov, 2008). In addition, firm size
pay dividends and dividend payout ratio. These findings imply and asset tangibility are positively associated with the likely hood
that when corruption is more severe, agency costs of equity tend
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Table 3
The effects of corruption on dividend policy under weak and strong creditor rights.
Variables
Decision to pay dividends Dividend payout ratio Decision to pay dividends Dividend payout ratio
CRI ≤ 2 CRI > 2 CRI ≤ 2 CRI > 2 CRI ≤ 2 CRI > 2 CRI ≤ 2 CRI > 2
Intercept −17.8403*** −24.6292*** −0.3170*** −0.5084*** −18.2962*** −38.8929*** −0.2948*** −0.6508***

(−34.86) (−10.12) (−27.87) (−8.54) (−35.36) (−14.27) (−26.63) (−9.72)
PRO 4.8724*** 5.3154*** 0.2595*** 0.3016*** 4.8823*** 5.3568*** 0.2596*** 0.3019***
(18.18) (13.88) (36.25) (23.84) (18.23) (13.95) (36.27) (23.86)
CAH −0.2944*** −0.1279 0.0326*** 0.0379*** −0.2956*** −0.1135 0.0327*** 0.0380***
(−2.77) (−0.81) (12.61) (7.51) (−2.77) (−0.72) (12.65) (7.53)
FGR −0.4895*** −0.6280*** −0.0191*** −0.0230*** −0.4896*** −0.6223*** −0.0190*** −0.0229***
(−18.37) (−16.21) (−26.53) (−16.95) (−18.37) (−16.03) (−26.41) (−16.92)
LEV 0.0684 −0.2437 0.0232*** 0.0204*** 0.0696 −0.2629 0.0235*** 0.0203***
(0.56) (−1.28) (7.92) (3.34) (0.57) (−1.38) (8.02) (3.31)
SIZ 0.4236*** 0.4189*** 0.0047*** 0.0067*** 0.4238*** 0.4221*** 0.0047*** 0.0067***
(40.31) (27.70) (24.70) (18.59) (40.32) (27.79) (24.60) (18.63)
ATG 0.3297*** −0.2180* 0.0126*** 0.0037 0.3294*** −0.2100* 0.0126*** 0.0037
(4.00) (−1.90) (6.24) (0.97) (4.00) (−1.83) (6.24) (0.99)
REA 2.6446*** 2.4151*** 0.0323*** 0.0502*** 2.6421*** 2.4227*** 0.0324*** 0.0503***
(26.66) (21.50) (22.57) (19.03) (26.65) (21.46) (22.65) (19.06)
SSA −0.5029*** −0.7293*** −0.0329*** −0.0382*** −0.5050*** −0.7252*** −0.0328*** −0.0382***
(−7.15) (−7.78) (−21.17) (−13.57) (−7.18) (−7.72) (−21.13) (−13.56)
COI 0.0379 0.2386*** 0.0009 0.0027*** −0.0114 0.7144*** 0.0033*** 0.0075***
(1.26) (4.71) (1.59) (3.12) (−0.37) (10.53) (6.75) (5.53)
ADI 15.3309*** 19.6180*** 0.2883*** 0.4224*** 15.6581*** 33.3199*** 0.2726*** 0.5597***
(28.50) (8.45) (18.48) (7.46) (28.97) (12.80) (17.66) (8.77)
CIV 3.2973*** 12.8380*** 0.0673*** 0.2662*** 3.2268*** 22.7919*** 0.0700*** 0.3659***
(22.23) (8.05) (14.88) (7.25) (22.07) (12.62) (15.59) (8.62)
EGR 0.0056 0.0076 −0.0003*** 0.0001 0.0050 0.0196*** −0.0003*** 0.0002
(1.33) (1.08) (−3.92) (0.42) (1.17) (2.69) (-3.03) (1.12)
UAC 0.0194*** 0.0485*** 0.0006*** 0.0011*** 0.0271*** 0.0694*** 0.0003* 0.0013***
(3.03) (6.97) (3.79) (5.04) (4.28) (9.67) (1.75) (5.91)
Industry dummies Yes Yes Yes Yes Yes Yes Yes Yes
Year dummies Yes Yes Yes Yes Yes Yes Yes Yes
Country dummies Yes Yes Yes Yes Yes Yes Yes Yes
No. of observations 158,355 46,961 158,355 46,961 158,355 46,961 158,355 46,961
Left-censored 47,677 14,843 47,677 14,843
DTP is the decision to pay dividends assigned 1 for payers and 0 otherwise. DPR is payout ratio. PRO is firm profitability. CAH is cash holdings. FGR is firm growth. LEV is firm
leverage. ATG is asset tangibility. REA is retained earnings to total assets ratio. SSA is the five-year standard deviation of net sales to assets. COI is corruption index. Higher
values of COI indicate higher corruption. ADI is the Anti-self-dealing Index provided by Djankov et al. (2008). CRI is the Revised Creditor Right Aggregate Score provided by
Djankov et al. (2007). CIV is a dummy variable assigned 1 for civil law countries and 0 otherwise. EGR is annual GDP growth rate. UAC is uncertainty avoidance index provided
by Hofstede et al. (2010). Z-statistics and t-statistics are in parentheses. *** is 1% of significance. ** is 5% of significance. * is 10% of significance.
Table 4
Robustness checks for the effects of corruption on dividend policy.
DTP DPR DTP DPR
Panel A - Regression for the reduced sample (UK, India, US, China, Japan and Taiwan are excluded)
COI 0.0636** 0.0007** 0.2140*** 0.0008***
(2.18) (2.54) (4.81) (2.90)
Number of observations 87,969 87,969 87,969 87,969
Panel B - Regression with DPR measured by dividends to earnings ratio

COI 0.0335*** 0.0795***
(3.25) (7.32)
Number of observations 205,316 205,316
Panel C - Regression with DPR measured by dividends to total assets ratio

COI 0.0015*** 0.0035***
(4.65) (11.20)
Number of observations 205,316 205,316
DTP is the decision to pay dividends assigned 1 for payers and 0 otherwise. DPR is payout ratio. COI is corruption index. Higher values of COI indicate higher corruption. Higher
value of these two indices illustrates lower corruption. Z-statistics and t-statistics are in parentheses. *** is 1% of significance. ** is 5% of significance. * is 10% of significance.
to pay and dividend magnitude. These findings imply that firms hypothesis. Mature firms tend to pay more dividends since their
with larger size and higher tangibility can have better access to investment opportunities are less available (DeAngelo, DeAngelo,
external funds at lower costs and they are more willing to pay & Stulz, 2006).
dividends (Myers & Majluf, 1984). The positive effects of retained Moreover, we find that the Anti-self-dealing Index is posi-
earnings on dividend decisions are consistent with the life cycle tively related to dividend policy. This result supports the outcome
G Model
Table 5
Robustness checks for the effects of corruption on dividend policy under weak and strong creditor rights.
Decision to pay dividends Dividend payout ratio Decision to pay dividends Dividend payout ratio
CRI ≤ 2 CRI > 2 CRI ≤ 2 CRI > 2 CRI ≤ 2 CRI > 2 CRI ≤ 2 CRI > 2
Panel A - Regression for the reduced sample (UK, India, US, China, Japan and Taiwan are excluded)
COI 0.0428 0.2386*** 0.0003 0.0027*** −0.1805*** 0.7144*** −0.0056*** 0.0075***
(1.07) (4.71) (0.32) (3.12) (−2.76) (10.53) (-3.51) (5.53)
No. of observations 41,008 46,961 41,008 46,961 41,008 46,961 41,008 46,961
Left-censored 14,677 14,843 14,677 14,843
Panel B - Regression with DPR measured by dividends to earnings ratio

COI 0.0243 0.0443*** 0.0724*** 0.1112***
(1.35) (3.31) (5.90) (4.20)
Left-censored 47,664 14,835 47,664 14,835
Panel C - Regression with DPR measured by dividends to assets ratio

COI 0.0013*** 0.0023*** 0.0030*** 0.0059***
(3.26) (3.77) (8.90) (6.37)
Left-censored 47,664 14,835 47,664 14,835
DTP is the decision to pay dividends assigned 1 for payers and 0 otherwise. DPR is payout ratio. COI is corruption index. Higher values of COI indicate higher corruption.
Z-statistics and t-statistics are in parentheses. *** is 1% of significance. ** is 5% of significance. * is 10% of significance.
hypothesis which argues that stronger shareholder protection rights. Besides, results of Tobit regression for other measures of
leads to higher dividend payment (La Porta et al., 2000). The pos- payout ratio (i.e. dividends to earnings and dividends to total assets)
itive correlation between creditor protection index and dividend also show that our research findings are stable.
policy is consistent with the substitute hypothesis which states
that dividend restrictions are a compensation for weaker credi- 6. Conclusion
tor rights (Brockman & Unlu, 2009). Furthermore, the regression
results show that firms incorporated in civil law countries tend to The extant literature shows that corruption dampens economic
pay more dividends than those in common law countries. growth and development at the macro level and its effect on firm
Table 3 reports the impacts of corruption on dividend policy growth is rather mixed at the micro level. Despite value of a bribery
by creditor protection. Overall, the coefficients of corruption index dollar which is worth more or less than a dollar of profit, we argue
(COI) are statistically and economically higher for the sub-sample that corruption is likely to increase agency costs of equity, hence
of strong creditor rights. These findings support the hypothesis shareholders have higher incentives to control managers. When
that corruption is more effective in dividend policy if creditors corruption is higher, firm managers need to use firm resources to
are strongly protected. When corruption is higher, firms tend to make unofficial payments and they tend to take this opportunity
accumulate more cash to make unofficial payments. In countries of to expropriate shareholders. Consequently, shareholders recogniz-
strong creditor protection, firm managers are more willing to serve ing this behavior need to force managers to pay more dividends
shareholders’ benefits (Shao et al., 2013); therefore, they tend to as a means mitigate the agency problem. This paper examines the
pay more dividends as shareholders suggest to reduce cash flows effects of corruption on dividend decisions in the light of agency
that are available for making bribes. theory across 47 countries. Corruption indices are based on both
Corruption Perception Index and Control of Corruption Index. We
5. Robustness checks find that firms tend to pay more dividends when corruption is more
severe and this relationship is stronger under stronger creditor
Table 4 presents robustness checks for the effects of corruption protection. Our research findings imply that although corruption
on corporate payout policy and Table 5 shows robustness checks environment may result in a firm-level agency problem associated
for this relationship under weak and strong creditor protection. with cash holdings, shareholders are able to recognize and reduce
Regression results for the reduced samples without firms incor- agency costs by forcing managers to pay more dividends.
porated in UK, India, US, China, Japan and Taiwan illustrate that
corruption indices are also positively related to dividend payment Appendix A
and this relationship is stronger in countries of strong creditor
G Model
Table A1
Coruption Perception Index from 2002 to 2015.
Country 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Argentina 2.8 2.5 2.5 2.8 2.9 2.9 2.9 2.9 2.9 3.0 35.0 34.0 34.0 32.0
Australia 8.6 8.8 8.8 8.8 8.7 8.6 8.7 8.7 8.7 8.8 85.0 81.0 80.0 79.0
Austria 7.8 8.0 8.4 8.7 8.6 8.1 8.1 7.9 7.9 7.8 69.0 69.0 72.0 76.0
Belgium 7.1 7.6 7.5 7.4 7.3 7.1 7.3 7.1 7.1 7.5 75.0 75.0 76.0 77.0
Canada 9.0 8.7 8.5 8.4 8.5 8.7 8.7 8.7 8.9 8.7 84.0 81.0 81.0 83.0
Switzerland 8.5 8.8 9.1 9.1 9.1 9.0 9 9.0 8.7 8.8 86.0 85.0 86.0 86.0
China 3.5 3.4 3.4 3.2 3.3 3.5 3.6 3.6 3.5 3.6 39.0 40.0 36.0 37.0
Germany 7.3 7.7 8.2 8.2 8.0 7.8 7.9 8.0 7.9 8.0 79.0 78.0 79.0 81.0
Denmark 9.5 9.5 9.5 9.5 9.5 9.4 9.3 9.3 9.3 9.4 90.0 91.0 92.0 91.0
Egypt 3.4 3.3 3.2 3.4 3.3 2.9 2.8 2.8 3.1 2.9 32.0 32.0 37.0 36.0
Spain 7.1 6.9 7.1 7.0 6.8 6.7 6.5 6.1 6.1 6.2 65.0 59.0 60.0 58.0
Finland 9.7 9.7 9.7 9.6 9.6 9.4 9 8.9 9.2 9.4 90.0 89.0 89.0 90.0
France 6.3 6.9 7.1 7.5 7.4 7.3 6.9 6.9 6.8 7.0 71.0 71.0 69.0 70.0
United Kingdom 8.7 8.7 8.6 8.6 8.6 8.4 7.7 7.7 7.6 7.8 74.0 76.0 78.0 81.0
Hong Kong 8.2 8.0 8.0 8.3 8.3 8.3 8.1 8.2 8.4 8.4 77.0 75.0 74.0 75.0
Croatia 3.8 3.7 3.5 3.4 3.4 4.1 4.4 4.1 4.1 4.0 46.0 48.0 48.0 51.0
Hungary 4.9 4.8 4.8 5.0 5.2 5.3 5.1 5.1 4.7 4.6 55.0 54.0 54.0 51.0
Indonesia 1.9 1.9 2.0 2.2 2.4 2.3 2.6 2.8 2.8 3.0 32.0 32.0 34.0 36.0
India 2.7 2.8 2.8 2.9 3.3 3.5 3.4 3.4 3.3 3.1 36.0 36.0 38.0 38.0
Ireland 6.9 7.5 7.5 7.4 7.4 7.5 7.7 8.0 8.0 7.5 69.0 72.0 74.0 75.0
Israel 7.3 7.0 6.4 6.3 5.9 6.1 6 6.1 6.1 5.8 60.0 61.0 60.0 61.0
Italy 5.2 5.3 4.8 5.0 4.9 5.2 4.8 4.3 3.9 3.9 42.0 43.0 43.0 44.0
Jamaica 4.0 3.8 3.3 3.6 3.7 3.3 3.1 3.0 3.3 3.3 38.0 38.0 38.0 41.0
Jordan 4.5 4.6 5.3 5.7 5.3 4.7 5.1 5.0 4.7 4.5 48.0 45.0 49.0 53.0
Japan 7.1 7.0 6.9 7.3 7.6 7.5 7.3 7.7 7.8 8.0 74.0 74.0 76.0 75.0
Kenya 1.9 1.9 2.1 2.1 2.2 2.1 2.1 2.2 2.1 2.2 27.0 27.0 25.0 25.0
South Korea 4.5 4.3 4.5 5.0 5.1 5.1 5.6 5.5 5.4 5.4 56.0 55.0 55.0 54.0
Sri Lanka 3.7 3.4 3.5 3.2 3.1 3.2 3.2 3.1 3.2 3.3 40.0 37.0 38.0 37.0
Lithuania 4.8 4.7 4.6 4.8 4.8 4.8 4.6 4.9 5.0 4.8 54.0 57.0 58.0 59.0
Morocco 3.7 3.3 3.2 3.2 3.2 3.5 3.5 3.3 3.4 3.4 37.0 37.0 39.0 36.0
Mexico 3.6 3.6 3.6 3.5 3.3 3.5 3.6 3.3 3.1 3.0 34.0 34.0 35.0 31.0
Malaysia 4.9 5.2 5.0 5.1 5.0 5.1 5.1 4.5 4.4 4.3 49.0 50.0 52.0 50.0
Nigeria 1.6 1.4 1.6 1.9 2.2 2.2 2.7 2.5 2.4 2.4 27.0 25.0 27.0 26.0
Norway 8.5 8.8 8.9 8.9 8.8 8.7 7.9 8.6 8.6 9.0 85.0 86.0 86.0 88.0
New Zealand 9.5 9.5 9.6 9.6 9.6 9.4 9.3 9.4 9.3 9.5 90.0 91.0 91.0 91.0
Pakistan 2.6 2.5 2.1 2.1 2.2 2.4 2.5 2.4 2.3 2.5 27.0 28.0 29.0 30.0
Peru 4.0 3.7 3.5 3.5 3.3 3.5 3.6 3.7 3.5 3.4 38.0 38.0 38.0 36.0
Philippines 2.6 2.5 2.6 2.5 2.5 2.5 2.3 2.4 2.4 2.6 34.0 36.0 38.0 35.0
Poland 4.0 3.6 3.5 3.4 3.7 4.2 4.6 5.0 5.3 5.5 58.0 60.0 61.0 63.0
Russia 2.7 2.7 2.8 2.4 2.5 2.3 2.1 2.2 2.1 2.4 28.0 28.0 27.0 29.0
Singapore 9.3 9.4 9.3 9.4 9.4 9.3 9.2 9.2 9.3 9.2 87.0 86.0 84.0 85.0
Sweden 9.3 9.3 9.2 9.2 9.2 9.3 9.3 9.2 9.2 9.3 88.0 89.0 87.0 89.0
Thailand 3.2 3.3 3.6 3.7 3.6 3.3 3.5 3.4 3.5 3.4 37.0 35.0 38.0 38.0
Turkey 3.2 3.1 3.2 3.5 3.8 4.1 4.6 4.4 4.4 4.2 49.0 50.0 45.0 42.0
Taiwan 5.6 5.7 5.6 5.9 5.9 5.7 5.7 5.6 5.8 6.1 61.0 61.0 61.0 62.0
USA 7.7 7.5 7.5 7.6 7.3 7.2 7.3 7.5 7.1 7.1 73.0 73.0 74.0 76.0
South Africa 4.8 4.4 4.6 4.5 4.6 5.1 4.9 4.7 4.5 4.1 43.0 42.0 44.0 44.0
Table A2
Coruption Control Index from 2002 to 2015.
Country 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Argentina −0.47 −0.48 −0.42 −0.39 −0.34 −0.34 −0.44 −0.44 −0.36 −0.37 −0.44 −0.43 −0.54 −0.55
Australia 1.81 1.95 2.03 1.95 1.96 2.01 2.04 2.05 2.03 2.04 1.99 1.79 1.85 1.88
Austria 1.97 2.02 2.05 1.92 1.91 2.01 1.84 1.70 1.59 1.43 1.39 1.55 1.47 1.52
Belgium 1.50 1.42 1.38 1.39 1.31 1.36 1.37 1.46 1.53 1.58 1.61 1.67 1.57 1.57
Canada 2.03 1.99 1.83 1.88 1.96 2.00 2.00 2.06 2.07 1.98 1.93 1.89 1.84 1.89
Switzerland 2.11 2.07 2.01 2.02 2.09 2.15 2.12 2.07 2.07 2.04 2.15 2.13 2.15 2.14
China −0.52 −0.36 −0.56 −0.61 −0.51 −0.59 −0.52 −0.51 −0.56 −0.51 −0.44 −0.36 −0.34 −0.28
Germany 1.94 1.93 1.86 1.89 1.80 1.74 1.76 1.76 1.78 1.74 1.83 1.81 1.84 1.84
Denmark 2.37 2.42 2.43 2.29 2.47 2.45 2.39 2.45 2.36 2.40 2.38 2.40 2.25 2.21
Egypt −0.41 −0.55 −0.65 −0.62 −0.75 −0.76 −0.78 −0.52 −0.63 −0.70 −0.60 −0.63 −0.62 −0.64
Spain 1.36 1.39 1.36 1.34 1.19 1.09 1.19 1.06 1.08 1.10 1.13 0.90 0.63 0.58
Finland 2.43 2.44 2.44 2.33 2.46 2.40 2.34 2.25 2.16 2.20 2.24 2.20 2.17 2.28
France 1.23 1.35 1.33 1.37 1.46 1.46 1.41 1.44 1.47 1.53 1.46 1.33 1.31 1.31
United Kingdom 2.06 2.04 1.93 1.90 1.79 1.74 1.68 1.63 1.60 1.62 1.67 1.70 1.74 1.88
Hong Kong 1.71 1.85 1.87 1.78 1.87 1.92 1.90 1.89 1.96 1.85 1.74 1.64 1.62 1.65
Croatia 0.22 0.29 0.26 0.17 0.08 0.09 −0.01 −0.05 0.06 0.06 0.01 0.12 0.22 0.25
Hungary 0.58 0.68 0.69 0.65 0.66 0.62 0.47 0.43 0.37 0.40 0.36 0.32 0.16 0.15
Indonesia −1.14 −0.97 −0.93 −0.88 −0.84 −0.62 −0.59 −0.84 −0.75 −0.70 −0.64 −0.61 −0.56 −0.46
India −0.52 −0.42 −0.41 −0.36 −0.28 −0.40 −0.34 −0.45 −0.47 −0.54 −0.51 −0.52 −0.43 −0.35
Ireland 1.41 1.46 1.29 1.59 1.71 1.75 1.75 1.76 1.69 1.56 1.46 1.54 1.60 1.62
G Model
Table A2 (Continued)
Country 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Israel 1.23 1.12 0.93 0.83 1.01 0.85 0.90 0.81 0.76 0.80 0.91 0.91 0.87 0.94
Italy 0.55 0.51 0.38 0.41 0.48 0.34 0.27 0.20 0.13 0.18 0.07 0.05 −0.03 0.02
Jamaica −0.46 −0.38 −0.35 −0.31 −0.26 −0.30 −0.30 −0.28 −0.23 −0.16 −0.26 −0.28 −0.30 −0.23
Jordan −0.05 0.31 0.26 0.26 0.26 0.26 0.36 0.16 0.04 0.10 0.07 0.07 0.14 0.26
Japan 0.97 1.21 1.22 1.22 1.33 1.24 1.34 1.38 1.56 1.56 1.63 1.66 1.69 1.57
Kenya −1.00 −0.88 −0.86 −1.00 −0.93 −0.97 −1.06 −1.06 −0.91 −0.95 −1.09 −1.03 −0.93 −1.01
South Korea 0.50 0.56 0.39 0.62 0.35 0.60 0.47 0.54 0.47 0.53 0.54 0.61 0.55 0.37
Sri Lanka −0.18 −0.23 −0.15 −0.34 −0.20 −0.15 −0.23 −0.40 −0.42 −0.39 −0.24 −0.21 −0.34 −0.34
Lithuania 0.20 0.38 0.43 0.33 0.16 0.13 0.14 0.23 0.38 0.33 0.39 0.43 0.56 0.62
Morocco −0.19 −0.26 −0.14 −0.31 −0.41 −0.34 −0.38 −0.33 −0.20 −0.40 −0.44 −0.37 −0.27 −0.22
Mexico −0.18 −0.17 −0.30 −0.27 −0.26 −0.27 −0.24 −0.30 −0.36 −0.40 −0.41 −0.51 −0.76 −0.77
Malaysia 0.27 0.34 0.34 0.20 0.23 0.19 −0.05 −0.06 0.09 0.03 0.24 0.35 0.41 0.24
Nigeria −1.43 −1.36 −1.34 −1.16 −1.12 −1.05 −0.89 −1.03 −1.05 −1.17 −1.17 −1.22 −1.27 −1.08
Norway 2.17 2.07 1.94 2.01 2.13 1.99 1.91 1.99 2.09 2.15 2.26 2.29 2.23 2.24
New Zealand 2.32 2.35 2.38 2.20 2.33 2.33 2.31 2.39 2.34 2.30 2.32 2.34 2.25 2.28
Pakistan −0.91 −0.76 −1.08 −1.05 −0.81 −0.82 −0.90 −1.07 −1.09 −1.08 −1.06 −0.96 −0.83 −0.81
Peru −0.27 −0.08 −0.32 −0.33 −0.20 −0.25 −0.19 −0.31 −0.23 −0.22 −0.37 −0.42 −0.56 −0.53
Philippines −0.50 −0.58 −0.65 −0.62 −0.83 −0.72 −0.76 −0.77 −0.76 −0.67 −0.56 −0.38 −0.44 −0.45
Poland 0.40 0.42 0.14 0.27 0.27 0.30 0.46 0.45 0.50 0.56 0.66 0.60 0.64 0.67
Russia −0.93 −0.76 −0.80 −0.82 −0.91 −1.01 −1.11 −1.13 −1.09 −1.07 −1.04 −1.01 −0.92 −0.95
Singapore 2.32 2.23 2.33 2.17 2.19 2.24 2.25 2.22 2.18 2.11 2.12 2.08 2.07 2.09
Sweden 2.26 2.21 2.16 2.02 2.20 2.24 2.23 2.25 2.27 2.20 2.31 2.29 2.15 2.24
Thailand −0.31 −0.17 −0.23 −0.19 −0.38 −0.37 −0.41 −0.31 −0.33 −0.32 −0.37 −0.34 −0.45 −0.49
Turkey −0.52 −0.18 −0.18 −0.03 0.03 0.11 0.11 0.09 0.03 0.04 0.16 0.09 −0.15 −0.15
Taiwan 0.64 0.85 0.83 0.75 0.53 0.53 0.52 0.62 0.74 0.87 0.72 0.68 0.81 0.77
USA 1.92 1.76 1.83 1.55 1.35 1.39 1.45 1.29 1.27 1.27 1.41 1.31 1.38 1.40
South Africa 0.35 0.35 0.46 0.57 0.45 0.25 0.21 0.18 0.13 0.06 −0.12 −0.07 −0.06 0.03
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QUAECO-1303; No. of Pages 10 ARTICLE IN PRESS

Contents lists available at ScienceDirect

The Quarterly Review of Economics and Finance

Corruption, agency costs and dividend policy: International evidence

Mean Median SD 1st quartile 3rd quartile Min Max

Panel A. Firm-speciﬁc data

Panel B. Annual number of ﬁrms

Panel C. Industry Distribution

Panel D. Country-speciﬁc data

Civil law countries

Mean Median SD 1st quartile 3rd quartile Min Max

Portugal 372 125 68.55 0.03 0 1 104

Intercept −19.4932*** −0.3679*** −19.2099*** −0.3483***

Intercept −17.8403*** −24.6292*** −0.3170*** −0.5084*** −18.2962*** −38.8929*** −0.2948*** −0.6508***

DTP DPR DTP DPR

Panel B - Regression with DPR measured by dividends to earnings ratio

Panel C - Regression with DPR measured by dividends to total assets ratio

Panel B - Regression with DPR measured by dividends to earnings ratio

Panel C - Regression with DPR measured by dividends to assets ratio

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Intercept −19.4932* −0.3679* −19.2099* −0.3483*

Intercept −17.8403* −24.6292* −0.3170* −0.5084* −18.2962* −38.8929* −0.2948* −0.6508*