Hoang, Vie Anh; Nguyen, Thanh Huong; Nguyen, My Hanh; T uong, Ba Thanh
A icle
Do p ospec o i ms pay mo e di idends in imes o high
policy unce ain y?
Cogen Business & Managemen
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Sugges ed Ci a ion: Hoang, Vie Anh; Nguyen, Thanh Huong; Nguyen, My Hanh; T uong, Ba Thanh
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Do p ospec o fi ms pay mo e di idends in imes
o high policy unce ain y?
Vie Anh Hoang, Thanh Huong Nguyen, My Hanh Nguyen & Ba Thanh T uong
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Cogen Business & ManageMen
2024, VoL. 11, no. 1, 2332496
Do p ospec o i ms pay mo e di idends in imes o high policy
unce ain y?
Vie anh hoanga, hanh huong nguyenb, My hanh nguyena and Ba hanh uongc
aDepa men o Banking, he uni e si y o Danang, uni e si y o economics, Vie nam; bDepa men o Finance, he uni e si y
o Danang, uni e si y o economics, Vie nam; cDepa men o accoun ing, he uni e si y o Danang, uni e si y o economics,
Vie nam
ABSTRACT
his esea ch aims o explo e he nexus be ween business s a egy and di idend
paymen s. U ilizing a da ase encompassing U.s.-lis ed i ms spanning he pe iod om
1995 o 2018, ou analysis e eals ha i ms employing p ospec o s a egies exhibi a
highe p opensi y o di idend paymen s compa ed o de ende i ms. Ou indings
pe sis e en when accoun ing o i m ixed e ec s, employing an al e na i e subsample
me hodology, and demons a ing esilience o endogenei y and P opensi y sco e
Ma ching (PsM) analysis. We also documen ha agency con lic issues ela ed o ee
cash low in p ospec o i ms, s emming om o e in es men and capi al expendi u e
educ ion, con ibu e o an escala ion in di idend payou s ela i e o de ende i ms.
Finally, he p ospec o -di idend paymen associa ion is mo e p onounced in he con ex
o weake i m-le el in o ma ion and go e nance en i onmen s and du ing pe iods
cha ac e ized by high policy unce ain y. O e all, ou s udy ills a c ucial gap in he
li e a u e on he complexi ies o di idend decisions wi hin he con ex o di e en
s a egic o ien a ions.
1. In oduc ion
in he co po a e inance li e a u e, he impo ance o co po a e di idend policy o sha eholde s,
manage s, and he s ock ma ke has been highligh ed by seminal wo ks such as hose by Wal e (1956),
Black and scholes (1974), allen and Michaely (1995), g ullon e al. (2002), Deangelo e al. (2006), and
akindayomi and amin (2022). Despi e he ex ensi e empi ical esea ch on he di idend puzzle, a con-
spicuous gap in he li e a u e eme ges conce ning he in luence o i ms’ business s a egies on co po-
a e di idend policy. his s udy aims o add ess his gap and shed ligh on he ac o s shaping co po a e
di idend payou s, explo ing he po en ial mechanisms d i ing his associa ion.
a composi e measu e o business s a egy was c a ed by i ne e al. (1997) and Miles and snow
(1978, 2003), leading o he ca ego iza ion o i ms in o h ee dis inc g oups: p ospec o s, de ende s, and
analyze s. P ospec o i ms a e cha ac e ized by hei inno a ion-o ien ed app oach, ac i ely pa icipa ing
in esea ch and de elopmen (R&D) ac i i ies, and dynamically adap ing hei p oduc -ma ke mix. in
con as , de ende s a egy- ollowing i ms p io i ize e iciency, main aining lowe R&D in ensi y, concen-
a ing on a s able p oduc base, and showcasing consis en g ow h pa e ns wi hin exis ing p oduc
lines. analyze s, posi ioned be ween hese wo ex emes, embody a balanced app oach, as ou lined by
Miles and snow (1978, 2003) and hamb ick (1983). exis ing s udies sugges ha o ganiza ions cha ac e -
ized by a p ospec o s a egy may ace an ele a ed isk o in o ma ion asymme y due o he absence
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT Vie anh Hoang [email p o ec ed] Depa men o Banking, he uni e si y o Danang, uni e si y o economics, Vie nam.
h ps://doi.o g/10.1080/23311975.2024.2332496
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ARTICLE HISTORY
Recei ed 18 no embe
2023
Re ised 13 Ma ch 2024
accep ed 14 Ma ch 2024
KEYWORDS
Business s a egy;
di idend paymen s;
o e in es men ; capi al
expendi u e; in o ma ion
and go e nance
en i onmen s; policy
unce ain y
REVIEWING EDITOR
collins n im, Uni e si y o
sou hamp on, Uni ed
kingdom o g ea B i ain
and no he n i eland
SUBJECTS
co po a e Finance;
co po a e go e nance;
s a egic Managemen ;
Managemen
communica ions
2 V. a. hOang e al.
o R&D p icing in o ma ion and a high le el o ou come unce ain y associa ed wi h isky and inno a i e
p ojec s (aboody & le , 2000; Rajagopalan, 1997). addi ionally, p ospec o s, wi h hei b oad ange o
p oduc s and ma ke s, exhibi mo e g ow h oppo uni ies, exace ba ing in o ma ion asymme y p oblems
be ween manage s and ex e nal s akeholde s in e es ed in hese i ms (Miles & snow, 1978, 2003). P io
esea ch also links p ospec o s o highe agency con lic s compa ed o de ende s (chen & keung, 2019;
Dang e al., 2022; i ne e al., 1997; Rajagopalan, 1997; Rajagopalan & Finkels ein, 1992). he a gumen
posi s ha he in ensi e equi emen s o R&D in es men (hamb ick, 1983; sabhe wal & chan, 2001;
snow & hamb ick, 1980) and he absence o well-de ined pe o mance assessmen (Miles & snow, 2003;
naike e al., 2008) in p ospec o i ms c ea e incen i es o manage s o o e -in es in ine icien p oj-
ec s. li e a u e also indica es ha manage ial isk- aking beha io and epo ing opaci y in p ospec o s
exace ba e agency p oblems be ween manage s and ex e nal s akeholde s in hese i ms (a ms ong
e al., 2013; B ockman e al., 2015; chen e al., 2015). Fu he esea ch highligh s ha p ospec o i ms
ha e heigh ened incen i es o mi iga e in o ma ion asymme y and agency cos s wi h capi al p o ide s,
gi en hei eliance on ex e nal inancing sou ces (Ben ley e al., 2013; Miles & snow, 1978, 2003).
acco ding o di idend signaling heo y, a high di idend payou a io could se e as an e ec i e s a egy
o hese i ms o send cos ly posi i e signals abou u u e p ospec s, he us wo hiness o manage-
men , and he low le el o agency con lic s (lloyd e al., 1985). hail e al. (2014) ind ha in es o s
demand ewe di idend paymen s when in o ma ion asymme y is low, as hey a e mo e con iden abou
he secu i y o he weal h hey ha e in es ed in he i m.
Despi e he ex ensi e body o esea ch on his subjec , a conspicuous gap exis s, pa icula ly in he
explo a ion o how i ms’ business s a egies in luence hei di idend decisions. P io s udies ha e p e-
dominan ly ocused on inancial me ics, owne ship s uc u e, and mac oeconomic ac o s as de e mi-
nan s o di idend policy, o en neglec ing he c ucial ole played by a i m’s chosen business s a egy.
his o e sigh ep esen s a signi ican heo e ical gap as business s a egy, encompassing choices ega d-
ing inno a ion, e iciency, and ma ke posi ioning, undamen ally shapes a i m’s ope a ions and long- e m
objec i es. he absence o empi ical e idence add essing his gap implies an incomple e unde s anding
o he in ica e in e play be ween s a egic choices and di idend ou comes. also, p io esea ch lacks a
comp ehensi e examina ion o he unde lying mechanisms d i ing he ela ionship be ween business
s a egy and di idend payou s. Ou s udy seeks o add ess hese heo e ical limi a ions by in eg a ing
business s a egy in o he di idend policy amewo k, o e ing a be e unde s anding o how s a egic
choices impac he dis ibu ion o p o i s o sha eholde s.
employing he amewo k o i ne e al. (1997) and Miles and snow (1978, 2003), we es he ela-
ionship be ween p ospec o business s a egy and di idend payou s using a la ge sample o U.s. i ms
o e he pe iod om 1995 o 2018. We ind consis en e idence ha he di idend payou is la ge in
i ms wi h a p ospec o - ype business s a egy han in hose wi h a de ende - ype business s a egy. his
inding holds in all speci ica ions using al e na i e p oxies o di idend paymen , and when we conduc
a se ies o es s con olling o i m and yea ixed e ec s and e en employing di e en subsamples wi h
sepa a e p ospec o s and de ende s. Fu he , ou esul s emain obus o a ious es s using wo-s age
leas squa es (2sls) eg essions and p opensi y sco e ma ching (PsM) analysis o add ess po en ial
endogenei y conce ns ha may a ise due o e e se causali y p oblems and omi ed a iables. collec i ely,
ou indings sugges ha in es o s equi e lowe di idends in i ms adop ing a de ende - ype s a egy.
addi ionally, we ind ha his posi i e associa ion be ween a p ospec o business s a egy and co po a e
di idend policy is mo e p onounced in he con ex o weake i m-le el in o ma ion and go e nance
en i onmen s and du ing pe iods cha ac e ized by high policy unce ain y, as gauged by economic pol-
icy unce ain y (ePU) and p esiden ial elec ions.
his pape makes ou p ima y con ibu ions o he exis ing li e a u e. Fi s ly, ou s udy enhances he
limi ed li e a u e by ocusing on he ac o s in luencing di idend payou s. By inco po a ing business s a -
egy, we a e he i s o empi ically suppo he no ion ha business s a egy could se e as a de e minan
o di idend policy. speci ically, i ms adop ing an inno a ion-o ien ed p ospec o s a egy a e inclined o
pay highe di idends han hose adhe ing o an e iciency-o ien ed de ende s a egy. his unde s anding
o he impac o business s a egy on di idend paymen s can aid sha eholde s in e ec i ely alloca ing
hei esou ces among i ms wi h di e se business s a egies. in essence, ou s udy makes a subs an ial
con ibu ion o he co po a e inance li e a u e. secondly, p e ious esea ch has ou lined he
cOgen BUsiness & ManageMen 3
epe cussions o business s a egy on a ious co po a e inance decisions, such as in es men (habib &
hasan, 2021; na issi e al., 2017), budge a y usage (collins e al., 1997), cash holdings (Mage akis &
zelepis, 2020), and ax agg essi eness (higgins e al., 2015). We ex end his line o esea ch by p o iding
e idence ha business s a egy has a mo e ex ensi e applica ion in he ield o co po a e inance han
p e iously acknowledged in he li e a u e. hi dly, ou pape also in es iga es he unde lying channels
d i ing he posi i e ela ionship be ween p ospec o s and di idend payou s. his ex ension is c ucial o
cons uc ing mo e obus explana ions ega ding he ansmission mechanisms h ough which i ms’ busi-
ness s a egy in luences hei di idend decisions. Ou indings indica e ha agency con lic issues ela ed
o ee cash low in p ospec o s, s emming om o e -in es men and capi al expendi u e educ ion, con-
ibu e o an inc ease in di idend payou s in hese i ms compa ed o hose adop ing a de ende business
s a egy. las ly, we con ibu e u he e idence o he associa ion be ween i ms’ business s a egy and
di idend decisions by examining his co e ela ionship wi hin di e en in o ma ion and go e nance en i-
onmen s, pa icula ly du ing pe iods o high economic and poli ical unce ain y. We disco e ha his
posi i e ela ionship is mo e p onounced in weake in o ma ion and go e nance en i onmen s and is
mo e a ec ed du ing pe iods o high economic policy unce ain y and U.s. p esiden ial elec ions. o he
bes o ou knowledge, his esea ch ocus has no been ex ensi ely de ailed in he p e ious li e a u e.
he subsequen sec ions o his pape a e o ganized as ollows: sec ion 2 e iews he ela ed li e a u e
and de elops he hypo hesis. sec ion 3 elucida es he esea ch me hodology and da a. empi ical esul s
a e p esen ed in sec ion 4, and conclusions a e d awn in sec ion 5.
2. Backg ound
empi ical inance esea ch indica es ha a ange o inancial cha ac e is ics play a signi ican ole in in lu-
encing co po a e di idend payou s. impo an ac o s include i m size, as highligh ed by Fa inha (2003),
inancial le e age, as explo ed by coope and lambe ides (2018), and he impac o ee cash low, a con-
cep o iginally in oduced by Jensen (1986). O he de e minan s, including g ow h oppo uni ies (la Po a
e al., 2000), idiosync a ic isk (Ben-Da id, 2010), owne ship s uc u e (Ba aineh, 2021; Fi h e al., 2016;
g ins ein & Michaely, 2005), co po a e go e nance (a anasso & Mandell, 2018), co po a e isk managemen
(Dionne & Ouede ni, 2011), boa d gende (chen e al., 2017), and he li e cycle o i ms (Bha acha ya e al.,
2020), collec i ely con ibu e o shaping he dynamics o co po a e di idend payou s. axa ion is also iden-
i ied as a signi ican ac o in i ms’ payou policies (B a e al., 2008; B own e al., 2007; che y & saez,
2005; Floyd e al., 2015; Po e ba, 2004; Po e ba & summe s, 1984). legal en i onmen ac o s, such as inside
ading laws, ading es ic ions, o gene al in es o p o ec ion, also play a ole in co po a e di idend pay-
men s (alzah ani & las e , 2012; B ockman e al., 2014; e hymiou e al., 2021; Fang e al., 2017). Fu he mo e,
ano he s and o esea ch explo es he in luence o he in o ma ion en i onmen , as demons a ed by
Mille and Rock (1985) and li and Zhao (2008), along wi h he impac o p ice in o ma i eness, as high-
ligh ed by De cesa i and huang-Meie (2015), on co po a e di idend decisions. exis ing li e a u e also high-
ligh s he signi ican ole o unce ain y, wi h pa icula a en ion o economic policy unce ain y, as explo ed
by ab eu and gulamhussen (2013), Bliss e al. (2015), and a ig e al. (2021), in shaping he dynamics o
di idend paymen s. Despi e he ex ensi e discou se on he de e minan s o di idend policy in co po a e
inance li e a u e, a gap exis s in unde s anding he impac o business s a egy on co po a e di idend
policy. his pape add esses his issue by inco po a ing business s a egy in o he analysis.
he managemen li e a u e ca ego izes businesses in o h ee s a egies: p ospec o s, analyze s, and
de ende s, based on compe i i e ad an ages like p oduc s, ma ke s, echnology design, and o ganiza-
ional s uc u es (Miles & snow, 1978, 2003). P e ious s udies ha e linked R&D-in ensi e i ms, such as
p ospec o s, wi h heigh ened in o ma ion asymme y compa ed o de ende s. se e al ac o s con ibu e
o his phenomenon. Fi s ly, as R&D in es men s a e unique o each i m, ou side in es o s lack p icing
in o ma ion by obse ing o he i ms’ R&D ac i i ies (aboody & le , 2000). addi ionally, he absence o
o ganized ma ke s o in angible asse s dep i es in es o s o asse p icing in o ma ion (aboody & le ,
2000; Ba h e al., 2001). Mo eo e , as p ospec o s pu sue isky and inno a i e p ojec s, hey inhe en ly
exhibi g ea e ou come unce ain y han de ende s (Ben ley e al., 2013; Rajagopalan, 1997), esul ing in
a highe le el o in o ma ion asymme y. smi h and Wa s (1992) also demons a e ha p ospec o s,
ocused on seeking new and inno a i e p oduc s, iden i ying and exploi ing new ma ke oppo uni ies,
4 V. a. hOang e al.
end o possess mo e g ow h op ions. consequen ly, hey exhibi g ea e in o ma ion asymme y be ween
manage s and ou side in es o s conce ning he expec ed u u e cash lows om in es men oppo uni-
ies. in a simila ein, he less o malized and decen alized o ganiza ional s uc u e o p ospec o s a o ds
signi ican decision-making disc e ion o hei manage s (i ne e al., 1997; Miles & snow, 1978). his
disc e ion enables manage s o ac in hei sel -in e es , po en ially a he expense o ou side in es o s.
Bizjak e al. (1993) e eal ha p ospec o manage s a e mo i a ed o o e -in es in o de o maximize
s ock p ice pe o mance, e en when cognizan ha such sub-op imal in es men decisions may lead o
u u e unde -pe o mance. Mo eo e , when p ospec o manage s ha e a highe le el o s ock-based com-
pensa ion, he p opensi y o o e -in es men is u he exace ba ed o maximize pe sonal bene i s.
empi ical s udies indica e ha p ospec o i ms a e a a highe isk o expe iencing c ash e en s (habib
& hasan, 2017) compa ed o de ende s. Resea ch by a ms ong e al. (2013), B ockman e al. (2015), and
chen e al. (2015) sugges s ha such manage ial isk- aking beha io heigh ens agency con lic s be ween
manage s and ex e nal s akeholde s. Fu he mo e, p ospec o s a e associa ed wi h g ea e inancial
epo ing i egula i ies (e.g., es a emen s and sha eholde s’ lawsui s), highe audi ees (Ben ley-goode
e al., 2017), and weake in e nal con ol o e inancial epo ing (Ben ley-goode e al., 2017). hese ac-
o s u he con ibu e o heigh ened agency con lic s be ween manage s and ou side in es o s in p os-
pec o i ms. On he o he hand, u ilizing a da ase comp ising publicly aded companies in indonesia
spanning he pe iod om 2012 o 2018, he use ya e al. (2023) applied Miles and snow (1978, 2003)
amewo k. hei in es iga ion e ealed ha i ms adop ing p ospec o - ype business s a egies exhibi ed
lowe le els o acc ual ea nings managemen and eal ac i i ies manipula ion compa ed o hose employ-
ing de ende - ype business s a egies. his means ha business s a egies ca ego ized as p ospec o
ypes, which emphasize inno a ion and long- e m pe o mance goals, may no inhe en ly encou age
managemen o pa ake in ea nings managemen .
O e all, he explo a ion o he impac o business s a egy on co po a e di idend policy cons i u es
an essen ial and imely con ex o his s udy. gi en he e ol ing landscape o co po a e go e nance and
s a egic decision-making, unde s anding how dis inc business s a egies shape di idend policies
becomes c ucial. he p ospec o s, d i en by inno a ion and isk- aking, p esen an in iguing dynamic
wi h heigh ened in o ma ion asymme y, manage ial disc e ion, and a p opensi y o o e -in es men . as
businesses na iga e a complex ela ionship o ma ke dynamics, egula o y amewo ks, and s a egic
o ien a ions, in es iga ing how hese s a egies in luence di idend policies p o ides a be e unde s and-
ing o co po a e beha io . he uniqueness o his con ex lies in he examina ion o no only he inancial
de e minan s bu also he s a egic choices ha impac sha eholde alue. as a esul , examining he
in luence o business s a egy on di idend policies con ibu es o a b oade comp ehension o co po a e
inancial s a egies, making i a ele an and insigh ul a ea o s udy.
3.Theo e ical amewo k
he heo e ical amewo k designed o his s udy is in ensely oo ed in wo majo heo e ical pe spec-
i es: agency heo y and signaling heo y. agency heo y explo es he ela ionship dynamics be ween
manage s and sha eholde s wi hin o ganiza ions. Jensen and Meckling’s seminal wo k in 1976 es ab-
lished he heo e ical ounda ions by ecognizing he undamen al misalignmen o in e es s be ween
hese wo key s akeholde s. Manage s, ac ing as agen s, a e asked wi h making decisions on behal o
sha eholde s, who a e he p incipals. he cen al idea o agency heo y is ha con lic s a ise due o he
di e ing p io i ies and incen i es o manage s and sha eholde s. in he con ex o business s a egy he -
e ogenei y, his heo y becomes a powe ul ool o analyze how a ious s a egic o ien a ions in oduce
dis inc agency con lic s, shaping he decision-making p ocesses ela ed o di idend dis ibu ions.
Pa icula ly, a p ospec o i m, d i en by a isk- aking and inno a i e o ien a ion, may encoun e heigh -
ened agency con lic s compa ed o de ende o analyze i ms. he pu sui o new oppo uni ies, po en-
ially in ol ing high le els o unce ain y and isk, could c ea e ensions be ween manage s eage o
unde ake ambi ious p ojec s and sha eholde s seeking consis en e u ns. agency heo y, in his con ex ,
allows o a be e unde s anding o how s a egic choices impac he na u e and in ensi y o agency
con lic s. he li e a u e on agency heo y, spanning classic wo ks like Jensen and Meckling (1976) o
cOgen BUsiness & ManageMen 5
mo e ecen con ibu ions (Ben ley e al., 2013; Ben ley-goode e al., 2017; habib & hasan, 2021; hsu
e al., 2018), helps unpack he complexi ies o he p incipal-agen ela ionship wi hin he amewo k o
di e se business s a egies. By applying he lens o agency heo y, he s udy gains a comp ehensi e
unde s anding o how manage ial beha io s align wi h o de ia e om sha eholde in e es s in he con-
ex o a ied business s a egies, he eby en iching he heo e ical ounda ion o he esea ch.
On he o he hand, signaling heo y is an impo an heo e ical undamen al in eg a ed o unde s and
he s a egic use o di idend paymen s as communica i e signals by i ms. acco ding o Mille and Rock
(1985), i ms u ilize di idend policies as a delibe a e signaling mechanism o con ey ele an in o ma ion
o ex e nal s akeholde s, especially in es o s. his pe spec i e aligns wi h he idea ha di idends se e
as a eliable signal o a i m’s inancial heal h and g ow h po en ial, add essing in o ma ion asymme y
and unce ain y. con empo a y con ibu ions by Ben ley e al. (2013), cao e al. (2017), and ha akeh
e al. (2020), u he en ich he signaling heo y, emphasizing he s a egic na u e o di idend decisions
and hei implica ions o in es o pe cep ions. in he con ex o di e se business s a egies, signaling
heo y can explain how p ospec o s, de ende s, and analyze s s a egically deploy di idends o signal
hei unique cha ac e is ics and p ospec s. Fo ins ance, a p ospec o i m may use highe di idend pay-
ou s as a signal o i s abili y o manage inc eased isk and unce ain y, demons a ing inancial s abili y
and a commi men o sha eholde alue. in con as , a de ende i m, p io i izing s abili y and e iciency,
migh signal ca e ulness by main aining lowe di idend payou s and e aining ea nings o po en ial
in e nal in es men s. h ough he in eg a ion o signaling heo y in o ou heo e ical amewo k, ou
in es iga ion ocuses on he landscape o di idend decisions, employing a pe spec i e ha ecognizes
he delibe a e signaling s a egies employed by i ms wi h di e se business o ien a ions.
4. Li e a u e e iew and hypo heses de elopmen
4.1. Business s a egy and di idend paymen s
he inance li e a u e sugges s ha con lic s be ween manage s and sha eholde s a ise wi hin a i m,
leading o decisions ha diminish sha eholde weal h. inc eased di idend paymen s can mi iga e hese
con lic s by educing cash lows a ailable o manage s, de e ing p i a e bene i s and weal h exp op ia-
ion (eas e b ook, 1984; g ossman & ha , 1982; Jensen, 1986; koo e al., 2017). in o he wo ds, he
undamen al p emise is ha manage s, d i en by sel -in e es , may make choices ha p io i ize hei
p i a e bene i s and engage in weal h exp op ia ion, leading o ad e se implica ions o he b oade
sha eholde base. howe e , agency heo y con ends ha his con lic can be s a egically managed, and
one such mechanism is h ough inc eased di idend paymen s. By alloca ing a signi ican po ion o ea n-
ings o sha eholde s in he o m o di idends, i ms can ac i ely cu ail he cash lows a ailable o man-
age s. his educ ion ac s as a de e en , discou aging manage s om pu suing a enues ha may ca e
p ima ily o hei pe sonal gains a he expense o sha eholde alue. hus, he agency heo y pe spec-
i e sugges s ha heigh ened di idend paymen s se e as a mechanism o mi iga e con lic s o in e es ,
os e a mo e equi able dis ibu ion o weal h, and align he incen i es o manage s wi h he b oade
sha eholde base.
signaling heo y sugges s ha manage s possess supe io knowledge, and i ms can use subs an ial
di idends o con ey posi i e signals, eassu ing inancial ma ke s and a ac ing in es o s. One powe ul
ool in his signaling is he alloca ion o subs an ial di idends, which ac s as a angible demons a ion
o he i m’s inancial heal h, s abili y, and g ow h po en ial. as he li e a u e sugges s, signaling h ough
di idends se es he dual pu pose o eassu ing exis ing sha eholde s abou he i m’s ajec o y and
a ac ing po en ial in es o s seeking p omising oppo uni ies. in he con ex o ou s udy, he signaling
heo y becomes pa icula ly signi ican when conside ing di e en business s a egies. P e ious esea ch,
as e idenced by Ben ley e al. (2013), Miles and snow (1978, 2003), cao e al. (2017), and ha akeh e al.
(2020), indica es ha p ospec o s, in con as o de ende s, deal wi h heigh ened in o ma ion asymme-
y and agency con lic s. Facing g ea e unce ain y and isk, p ospec o s a e compelled o communi-
ca e hei g ow h po en ial and inancial soundness mo e asse i ely, making subs an ial di idend
paymen s a po en signaling mechanism. hence, he li e a u e on signaling heo y aligns wi h he
6 V. a. hOang e al.
speci ic cha ac e is ics associa ed wi h p ospec o i ms, highligh ing hei heigh ened incen i es o s a-
egically use di idends as a posi i e signal o eassu e s akeholde s and a ac ex e nal inancing
sou ces. Ou i s hypo hesis aligns wi h agency and signaling heo ies, conside ing he cha ac e is ics
o p ospec o s:
Hypo hesis H1: Fi ms wi h p ospec o s a egies end o pay mo e di idends han i ms ollowing de ende
s a egies.
4.2. The ole o in o ma ion and go e nance en i onmen s
P io li e a u e a gues ha mo e p ecise, use ul in o ma ion and be e co po a e go e nance help mi i-
ga e inside s’ in o ma ion ad an age o e ou side in es o s. lowe in o ma ion asymme y and agency
p oblems, in u n, alle ia e he p essu e on manage s o demons a e commi men ia cash disbu se-
men . Di idend payou s dec ease consequen ly (hail e al., 2014).
exis ing s udies show a nega i e associa ion be ween he quali y o a i m’s in o ma ion en i onmen s
and i s co po a e payou policy. Fo example, using a sample o Belgium-lis ed i ms o e he 1905–1909
pe iod, Van O e el e al. (2010) ind ha i ms paying di idends ha e a less anspa en income s a e-
men , suppo ing he no ion ha di idends a e a subs i u e o income s a emen anspa ency. employing
a la ge global da a se o 49 coun ies du ing he pe iod om 1993 o 2008, hail e al. (2014) epo
ha , ollowing he imp o emen o he in o ma ion en i onmen (e.g., he manda o y adop ion o iFRs
and he ini ial en o cemen o new inside ading laws), i ms a e less likely o pay di idends, and mo e
likely o cu his payou . in o he wo ds, mo e in o ma ion abou i ms mi iga es he in o ma ion asym-
me y p oblem and esul s in i ms wi h less eliance on di idend paymen s.
Besides, a body o empi ical wo ks iews di idends as a go e nance subs i u e. Fo ins ance, a anasso
and Mandell (2018) ind suppo o he p edic ion ha i ms wi h weake go e nance end o exhibi
highe di idends han be e -go e ned i ms. hey a gue ha when go e nance is weak, manage s mus
pay di idends o assu e sha eholde s ha hey will no exp op ia e hei in es men . in be e -go e ned
i ms, sha eholde s do no equi e di idend payou s as hey belie e ha he manage s will ac on sha e-
holde s’ in e es s. in a simila ein, John e al. (2015) documen ha i ms subjec o weak moni o ing
mechanisms a e mo e likely o alloca e a la ge p opo ion o hei payou o cash di idends. Jo and Pan
(2009) demons a e ha i ms wi h en enched manage s a e mo e likely o pay di idends. addi ionally,
hu and kuma (2004) documen a posi i e ela ion be ween di idends and ceO enu e, cash compensa-
ion, and boa d independence. simila ly, gyapong e al. (2021) employ a da ase o aus alian lis ed
en e p ises o in es iga e he impac o co po a e go e nance, pa icula ly boa d gende di e si y, on
co po a e di idend payou s. hei esul s e eal a posi i e co ela ion, indica ing ha a mo e gende -di e se
boa d has a bene icial in luence on di idend paymen s. con e sely, elmag hi e al. (2017) employ a sam-
ple o small- and medium-sized en e p ises in he Uk and ind a signi ican nega i e ela ionship be ween
boa d gende di e si y and he le el o di idend payou . in a comp ehensi e e iew o li e a u e span-
ning he las wo decades, Das Mohapa a and Panda (2022) sys ema ically examine he nexus be ween
co po a e go e nance and di idend policy. hei indings e eal a p e ailing end ac oss he majo i y o
s udies, indica ing a posi i e associa ion be ween enhanced co po a e go e nance p ac ices and inc eased
di idend payou s.
Based on he abo e analyses, we p edic ha be e in o ma ion and go e nance en i onmen s help
p ospec o s o educe in o ma ion asymme y and agency con lic s, he eby lessening hei di idend
p essu e. acco dingly, we o mula e he ollowing hypo hesis:
Hypo hesis H2: he posi i e associa ion be ween p ospec o s a egy and di idend paymen s is mo e p o-
nounced o i ms wi h weake in o ma ion quali y and poo e go e nance en i onmen s.
4.3. The impac o policy unce ain y
co po a e di idend policy exhibi s sensi i i y o economic and poli ical unce ain y, wi h a gumen s
sugges ing ha di idend payou s can unc ion as e ec i e ools o i ms o eassu e in es o s and
sha eholde s du ing pe iods o economic and poli ical lux (a ig e al., 2021; sa wa e al., 2020). he
cOgen BUsiness & ManageMen 7
a ionale posi s ha highe unce ain y ampli ies he necessi y o employing di idends as mechanisms
o assu ance.
empi ical s udies subs an ia e ha i ms adjus hei di idend policies in esponse o economic unce -
ain y. Fo ins ance, Buchanan e al. (2017) in es iga e how i ms eac o unce ain y su ounding U.s.
ax policy changes and ind ha i ms end o inc ease di idend paymen s one yea be o e an icipa ed
ax inc eases. ab eu and gulamhussen (2013) demons a e ha la ge , mo e p o i able, bu low-g ow h
banks inc ease di idend payou s be o e and du ing inancial c ises. his e idence sugges s ha di idends
se e as signals o u u e g ow h oppo uni ies, a ac ing deb and equi y inancing when needed, e en
du ing inancial c ises. a ig e al. (2021) u he suppo his no ion by showing ha i ms pay highe
di idends du ing pe iods o high economic Policy Unce ain y (ePU). hey ind ha ePU has a s onge
impac on di idends in amily i ms and hose wi h concen a ed owne ship, which a e p one o g ea e
agency p oblems. addi ionally, he posi i e co ela ion be ween ePU and di idend payou s is mo e p o-
nounced in coun ies wi h weak in es o p o ec ion, disclosu e, secu i ies egula ion, and en o cemen
quali y.
Fi ms also adjus hei co po a e decisions in esponse o elec o al unce ain ies, such as paying ewe
axes, educing in es men and hi ing, and delaying inancing (Du ne , 2013; Jens, 2017; li e al., 2016).
gi en he unce ain y abou he con inui y o economic policies unde incoming go e nmen s, manag-
e s, possessing be e in o ma ion abou po en ial policy changes, con ibu e o inc eased in o ma ion
asymme y be ween manage s and ou side in es o s su ounding elec ions (Du ne , 2013). his in o ma-
ion asymme y becomes a pi o al de e minan o an inc ease in di idend payou s. analyzing a subs an-
ial da ase co e ing six U.s. p esiden ial elec ions om 1996 o 2016, Fa ooq and ahmed (2019)
demons a e ha elec ion yea s a e associa ed wi h highe di idend payou a ios ela i e o non-elec ion
yea s. hey a i m ha in o ma ion asymme ies linked o elec ion yea s p omp i ms o pay ele a ed
di idends.
in his pape , we expec ha inc eased in o ma ion asymme y and agency cos s a ising om eco-
nomic and poli ical unce ain y equi e p ospec o s o pay highe di idends. We o mula e he ollowing
hypo hesis:
Hypo hesis H3: he posi i e associa ion be ween p ospec o i ms and di idend paymen s is mo e p onounced
du ing high policy unce ain y.
5. Resea ch design
5.1. Da a and sample cha ac e is ics
o alida e ou hypo heses, we employ a sample comp ising all U.s.-lis ed i ms spanning he pe iod
om 1995 o 2018. We u ilize he me hodology es ablished by i ne e al. (1997) and Miles and snow
(1978, 2003) o quan i y he business s a egy a iable, as ou lined in appendix 2. Fi m cha ac e is ics
and o he con ol a iables we e collec ed om compus a , he homson Reu e s ins i u ional holdings
(13 F), i/B/e/s, and he ins i u ional sha eholde se ices (iss) da abase. economic policy unce ain y and
p esiden ial elec ion a iables a e aken om he websi e www.policyunce ain y.com and he Da abase
o Poli ical ins i u ions. he de ini ion and measu emen o all a iables in ou esea ch models a e
desc ibed in appendix 1. o ensu e po en ial ou lying obse a ion con ol, we winso ize all con inuous
a iables a he 1% and 99% le els. ini ially, we selec ed a sample comp ising all i ms wi h a minimum
o wo yea s’ wo h o da a a ailable in he compus a da abase, esul ing in an ini ial da ase o 51,671
i m-yea obse a ions. subsequen ly, i ms lacking bo h business s a egy measu es and di idend pay-
men da a we e excluded. Following his sc eening p ocess, ou inal analy ical sample consis ed o
47,536 i m-yea obse a ions.
he indings p esen ed in Figu e 1, indica ing he di idend payou a io o U.s. non- inancial i ms
o e he esea ch pe iod om 1995 o 2018, e eal a dynamic end. he g aph illus a es a subs an ial
decline in he di idend payou a io, d opping om i s peak o app oxima ely 0.325 in 1995 o a ough
o 0.10 in he ea ly 2000s. his sha p dec ease implies ha i ms alloca ed a smalle po ion o hei
ea nings o di idends du ing his pe iod. howe e , he subsequen eco e y, hough g adual, appea s
e a ic, wi h he a io g adually inc easing and eaching nea ly 0.25 by 2018. his obse a ion sugges s
14 V. a. hOang e al.
Table 5. endogenei y.
Va iables 1s s age
2nd s age
DIVEARN
(1)
DIVSALE
(2)
DIVCASH
(3)
L1.PROSPECTOR 0.6981
(202.57)***
Ex.PROSPECTOR 0.0171 0.0004 0.0039
(5.92)*** (3.73)*** (5.15)***
L1.DIVEARN 0.669
(125.92)***
L1.DIVSALE 0.8737
(225.00)***
L1.DIVCASH 0.8104
(200.68)***
SIZE 0.0216 0.0177 0.0004 0.0036
(16.14)*** (18.35)*** (11.26)*** (13.20)***
ROA −0.0301 0.1074 0.0021 0.0152
(-2.42)** (20.10)*** (8.93)*** (10.64)***
LEV 0.0287 −0.1277 −0.0027 −0.0258
(3.84)*** (-27.37)*** (-14.60)*** (-19.26)***
MB −0.0037 −0.0001 0.0004 0.002
(-2.58)*** (-0.09) (12.58)*** (10.66)***
CAPEX 22.6399 −0.2505 −0.0087 −0.2982
(8.92)*** (-0.39) (-0.34) (-1.56)
RETA 0.0123 −0.0031 0.0001 0.0006
(8.11)*** (-4.64)*** (1.99)** (3.19)***
ROVOL −0.0774 −0.0195 −0.0007 −0.0085
(-4.64)*** (-2.50)** (-2.06)** (-4.50)***
AGE 0.0041 0.0194 0.0004 0.005
(1.68)* (11.64)*** (6.02)*** (11.20)***
IO −0.028 −0.0318 −0.0013 −0.0088
(-4.50)*** (-7.59)*** (-8.20)*** (-7.75)***
ANALYST −0.0031 −0.0013 0.0001 −0.0001
(-9.13)*** (-5.51)*** (0.58) (-0.85)
Cons an 0.1116 −0.0414 −0.0026 −0.0244
(2.78)*** (-1.54) (-3.67)*** (-3.48)***
indus y and Yea e ec s Yes Yes Yes Yes
adj R20.5474 0.5582 0.8293 0.7493
obs 51,771 51,771 51,771 51,771
his able epo s he panel eg ession o di idend paymen s on co po a e business s a egy add essing endogenei y conce n using 2sLs.
Panel a p esen s he i s s age, p edic ing co po a e business s a egy using p ospec o s a egy as a dependen a iable. We use he i e-yea
lagged business s a egy as an ins umen in he i s s age eg ession. Panel B p esen s he esul s on he impac o p edic ed p ospec o
s a egy on di idend. he -s a is ics a e p esen ed in pa en heses. supe sc ip s *, **, and *** indica e signi icance le els o 10%, 5%, and 1%,
espec i ely.
Table 6. P opensi y sco e ma ching analysis.
Panel a: P opensi y sco e ma ching
ea men Con ol - es
SIZE 6.4640 5.6674 1.57
ROA 0.0169 0.0183 1.07
LEV 0.2527 0.2962 1.26
MB 1.9503 1.7967 0.93
CAPEX 0.0312 0.0342 1.09
RETA −0.0467 −0.0600 0.87
ROVOL 0.0657 0.0875 1.01
AGE 2.9184 2.6114 1.62
IO 0.5507 0.5027 1.51
ANALYST 6.6237 5.7775 1.22
Panel B: PsM Reg ession
Va iables
DIVEARN
(1)
DIVSALE
(2)
DIVCASH
(3)
PROSPECTOR 0.0147 0.0003 0.0026
(4.67)*** (2.98)*** (4.26)***
Cons an −0.0439 −0.0018 −0.0096
(-1.47) (-2.39)** (-1.38)
Con ol a iables Yes Yes Yes
indus y and Yea e ec s Yes Yes Yes
Adj R20.5599 0.8459 0.7445
Obs 22,417 22,417 22,417
his able epo s he panel eg ession o di idend paymen s on co po a e business s a egy
using he p opensi y sco e ma ching analysis. he -s a is ics a e p esen ed in pa en heses.
supe sc ip s *, **, and *** indica e signi icance le els o 10%, 5%, and 1%, espec i ely.
cOgen BUsiness & ManageMen 15
Mo eo e , lang and li zenbe ge (1989) s a e ha educing o e in es men can enhance i m alue
and inc ease di idend paymen s. na issi e al. (2017) a gue ha p ospec o s a e mo e likely o o e -in es
han de ende s due o g ea e in o ma ion asymme y and agency con lic s be ween manage s and ou -
side in es o s in p ospec o i ms. We, he e o e, expec ha he p ospec o s a egy will be posi i ely
co ela ed wi h o e in es men , and h ough his channel, wi h di idend paymen s.
Fu he mo e, mo i a ed by he s udy o Denis e al. (1994) on he co ela ion be ween capi al expen-
di u es and di idend changes, we also examine whe he business s a egy op ions exe di e en impac s
on capi al expendi u e. P io s udies a i m ha p ospec o s a e associa ed wi h non-capi al expendi u e,
especially in he o m o R&D, bu exhibi low capi al expendi u e (Mau y, 2021; na issi e al., 2017),
whe eas de ende s a e e iciency-o ien ed and main ain a lowe le el o R&D in ensi y in suppo o
in es ing in capi al expendi u es (hamb ick, 1983; Miles & snow, 1978, 2003). acco dingly, i is expec ed
ha he p ospec o s a egy is nega i ely co ela ed wi h capi al expendi u e.
able 7 p esen s he panel eg ession o he impac o business s a egy on o e in es men and cap-
i al expendi u e. OVERINVEST (o e in es men ) and CAPEX (capi al expendi u e) a e he dependen a i-
ables in ou models. We ollow Biddle e al. (2009) o cons uc ou measu e o o e in es men . he
OVERINVEST a iable is anked by he mean o a decile-based measu e o cash and le e age. We mul iply
le e age by minus one be o e anking, so ha he a iable inc eases in he endency o o e in es men .
he key explana o y a iable, PROSPECTOR, is a dummy a iable ha akes he alue o one o
p ospec o - ype i ms and ze o o de ende s. a se o con ol a iables includes i m size (SIZE), ma ke - o-
book a io (MB), loss (LOSS), cash holdings (CASH), cash low ola ili y (CFVOL), sale ola ili y (SALEVOL),
Table 7. he e ec s o business s a egy on co po a e o e in es men and capi al
expendi u e.
Va iables
OVERINVEST
(1)
CAPEX
(2)
PROSPECTOR 0.0053 −0.0098
(3.01)*** (-4.59)***
SIZE 0.0057 −0.0043
(8.44)*** (-18.48)***
IO −0.0097 0.0078
(-2.77)*** (6.94)***
AGE 0.0020 −0.0017
(1.56) (-4.07)***
CASH 0.4427 0.0100
(55.92)*** (4.09)***
MB 0.0053 0.0054
(6.03)*** (19.53)***
LOSS 0.0156 −0.0078
(6.91)*** (-10.41)***
ANALYST −0.0003 0.0003
(-1.82)* (-5.68)***
CFVOL −0.0139 0.0059
(-3.58)*** (4.27)***
SALEVOL −0.0167 −0.0046
(-2.75)*** (-2.31)**
INVESTVOL −0.0005 0.0001
(-8.85)*** (2.13)**
Z-Sco e 0.0208 0.0017
(27.20)*** (7.96)***
TANG −0.0562 0.1544
(-12.11)*** (87.64)***
CFO/SALE 0.0069 0.0406
(0.99) (14.39)***
DIVDUM −0.0135 −0.0074
(-7.21)*** (-12.17)***
CYCLE 0.0009 −0.0011
(2.11)** (-7.97)***
Cons an −2.8610 −3.5542
(-3.69)*** (-0.65)
indus y & Yea e ec s Yes Yes
adj R20.3876 0.4678
obs 41,874 41,874
his able epo s he panel eg ession o he impac o business s a egy on o e in es men and
capi al expendi u e. Following Biddle e al. (2009), o e in es men is de ined as a anked a iable
based on he mean o a decile-based measu e o cash and le e age. Consis en wi h Biddle e al.
(2009), we mul iply le e age by minus one be o e anking so ha a iable is inc easing in he
endency o o e in es men . he -s a is ics a e p esen ed in pa en heses. supe sc ip s *, **, and
*** indica e signi icance le els o 10%, 5%, and 1%, espec i ely.
16 V. a. hOang e al.
in es men ola ili y (INVESTVOL), i m age (AGE), inancial dis ess (Z-Sco e), angibili y (TANG), ope a ing
ne cash low o sales (CFO/SALE), di idend s a us (DIVDUM), ope a ing cycle (CYCLE), ins i u ional own-
e ship (IO), and analys co e age (ANALYST).
he esul s in able 7 indica e ha he coe icien o he PROSPECTOR a iable is posi i e a he sig-
ni icance le el o 5% o he model in column (1), bu signi ican ly nega i e a he 1% le el o he
model in column (2). he esul s a e consis en wi h ou expec a ions ha p ospec o s a e mo e likely
o engage in o e in es men compa ed o de ende s, which may esul in highe di idend paymen s. he
inding also indica es ha i ms adop ing a p ospec o s a egy expe ience lowe capi al expendi u e
han hose ollowing a de ende s a egy. his e idence sugges s ha one possible mechanism linking
business s a egy and di idend policy is a educ ion in capi al expendi u e ha may aise he agency
cos s o ee cash low excess in p ospec o s.
6.4. In o ma ion and go e nance en i onmen s and di idend paymen s
We con inue in es iga ing ou unde s anding o he mode a ing e ec o in o ma ion and go e nance
en i onmen s on he associa ion be ween p ospec o business s a egy and di idend paymen s
(hypo hesis H2). P io s udies a gue ha he a ailabili y o p ecise and use ul in o ma ion and he
be e men o co po a e go e nance help mi iga e inside s’ in o ma ion ad an age o e ou side in es-
o s, which in u n alle ia es he p essu e on manage s o demons a e commi men ia cash disbu se-
men , and subsequen ly leads o lowe di idend payou s (a anasso & Mandell, 2018; hail e al., 2014;
John e al., 2015). he e o e, we p edic ha be e in o ma ion and go e nance en i onmen s help
p ospec o s educe he le el o in o ma ion asymme y and agency con lic s, which lessen hei di i-
dend p essu e.
o es he hypo hesis, we ini ially examine how in o ma ion asymme y in luences he ela ionship
be ween business s a egy and di idend paymen s. o p oxy in o ma ion asymme y, we employ he
p obabili y o inside ading (PIN) and he inancial s a emen opaci y (OPAQUE) a iables. Following he
heo e ical amewo k ou lined by easley and O’ha a (1987), we calcula e he p obabili y o inside ad-
ing (PIN) by analyzing imbalances be ween buy and sell ades, es ima ing he likelihood o in o med and
unin o med in o ma ion e en s. he OPAQUE a iable ep esen s he mo ing sum o he absolu e alue
o disc e iona y acc uals o e he h ee-yea pe iod om -1 o -3, wi h disc e iona y acc uals compu ed
using he modi ied Jones model (Dechow e al., 1995). h oughou he sample pe iod, we ca ego ize
i ms in o high and low se s based on he median alue o each measu e o empi ical es ima ion,
main aining consis ency wi h all o he a iables in ou es s. he esul s a e p esen ed in able 8.
Panel a p esen s he esul o he mode a ing e ec o he p obabili y o inside ading (PIN), which
p omo es a posi i e ela ionship be ween p ospec o i ms and di idend payou s. howe e , he associa-
ion is mo e explici and displays mo e signi icance when he e is a high p obabili y o inside ading
han he associa ion in he case o a low p obabili y o inside ading. Fo HighPIN, he coe icien s o
PROSPECTOR a e posi i e and s a is ically signi ican in h ee models wi h al e na i e p oxies o di idend
paymen s a he 1% and 10% le el, whe eas o he LowPIN g oup, he coe icien o PROSPECTOR is
posi i e, bu insigni ican in he model wi h DIVSALE p oxy.
We u he examine how inancial s a emen opaci y (OPAQUE) impac s he co e ela ionship o ou
s udy as demons a ed in Panel B. simila ly, he esul s o he e ec o inancial s a emen opaci y on
di idend paymen s o p ospec o i ms a e mo e signi ican in he Mo e OPAQUE g oup o i ms o h ee
al e na i e models a he 1% and 10% le els. Fo he Less OPAQUE se , PROSPECTOR is ound o be insig-
ni ican o explain o DIVSALE and DIVCASH. he indings align wi h ou p edic ion ha he posi i e
associa ion be ween p ospec o i ms and di idend payou s is p omo ed when he i m-le el in o ma ion
en i onmen is no anspa en .
We con inue es ing ou second hypo hesis on he mode a ing e ec o he go e nance en i onmen
on he business s a egy—di idend paymen ela ion. i is a gued ha i ms wi h weake go e nance
mechanisms end o aise highe di idends han be e -go e ned i ms (a anasso & Mandell, 2018; John
e al., 2015). in he s udy, we use he ex e nal ma ke o co po a e con ol measu ed by he index o
akeo e suscep ibili y (TSIND) de eloped by cain e al. (2017) as a p oxy o go e nance quali y. he
index measu es he likelihood o a hos ile acquisi ion, in which a highe akeo e suscep ibili y index
cOgen BUsiness & ManageMen 17
sugges s a g ea e p obabili y o being aken o e and, he e o e, indica es weake p o ec ions o co -
po a e go e nance. likewise, o he in o ma ion measu e, we spli he i ms by he median alue in o
wo ca ego ies as high and low o each gi en iscal yea o ou es ima ion. We epo he esul s o he
eg ession in able 9. he esul s again con i m ou p edic ion. he posi i e coe icien s o he PROSPECTOR
a iable a e mo e s a is ically signi ican in he High TSIND se , which suppo s ou iew ha he p os-
pec o s a egy does inc ease di idend paymen s o a g ea e ex en in i ms wi h weake go e nance
mechanisms, as e lec ed by highe akeo e p o ec ion.
6.5s.Poli ical unce ain y and di idend paymen s
We pe o m es ing ou inal hypo hesis on he e ec o economic and poli ical unce ain y on he
di idend paymen s o p ospec o i ms. a ig e al. (2021) a gued ha i ms use di idends as an e ec i e
ool o assu e in es o s and sha eholde s when aced wi h unce ain si ua ions due o economic and
poli ical changes. Besides, i is s udied ha he in o ma ion asymme ies a e exagge a ed in elec ion
Table 8. in o ma ion en i onmen , business s a egy and di idend paymen s.
Va iables
Panel a: P obabili y o inside ading (Pin)
High PIN Low PIN
DIVEARN
(1)
DIVSALE
(2)
DIVCASH
(3)
DIVEARN
(4)
DIVSALE
(5)
DIVCASH
(6)
PROSPECTOR 0.0224 0.0003 0.0023 0.0191 0.0002 0.0033
(4.36)*** (1.84)* (1.84)* (3.02)*** (1.21) (2.14)**
Cons an −0.1084 −0.0026 −0.0183 0.0108 −0.0015 0.0076
(-2.13)** (-1.32) (-0.92) (0.20) (-0.61) (0.55)
Con ol a iables Yes Yes Yes Yes Yes Yes
indus y and Yea
e ec s
Yes Yes Yes Yes Yes Yes
adj R20.4597 0.6997 0.6834 0.5064 0.8462 0.7633
obs 7,787 7,787 7,787 6,630 6,630 6,630
Va iables
Panel B: Financial s a emen opaci y (oPaQue)
Mo e OPAQUE Less OPAQUE
DIVEARN
(1)
DIVSALE
(2)
DIVCASH
(3)
DIVEARN
(4)
DIVSALE
(5)
DIVCASH
(6)
PROSPECTOR 0.0128 0.0002 0.0016 0.0091 0.001 0.0008
(4.57)*** (1.66)* (1.90)* (2.78)*** (0.08) (1.12)
Cons an −0.0997 −0.0035 −0.0013 −0.0776 −0.0012 −0.0163
(-2.08)** (-2.03)** (-0.07) (-0.88) (-1.05) (-1.43)
Con ol a iables Yes Yes Yes Yes Yes Yes
indus y and Yea
e ec s
Yes Yes Yes Yes Yes Yes
adj R20.5596 0.8594 0.7755 0.4992 0.7473 0.7071
Obs 27,004 27,004 27,004 27,650 27,650 27,650
his able epo s he esul s on how he deg ee o in o ma ion asymme y a ec s he ela ionship be ween co po a e business s a egy and
di idend paymen s. We use he p obabili y o inside ading and inancial s a emen opaci y as p oxies o in o ma ion asymme y. he
-s a is ics a e p esen ed in pa en heses. supe sc ip s *, **, and *** indica e signi icance le els o 10%, 5%, and 1%, espec i ely.
Table 9. Co po a e go e nance, business s a egy and di idend paymen s.
Va iables
akeo e suscep ibili y index ( sinD)
Low TSIND High TSIND
DIVEARN
(1)
DIVSALE
(2)
DIVCASH
(3)
DIVEARN
(4)
DIVSALE
(5)
DIVCASH
(6)
PROSPECTOR 0.0160 0.0002 0.0024 0.0195 0.0002 0.0034
(5.78)*** (2.65)*** (3.62)*** (3.08)*** (1.23) (2.18)**
Cons an −0.0165 −0.0024 −0.0191 −0.0110 −0.0015 −0.0078
(-0.41) (-2.37)** (-2.05)** (-0.20) (-0.62) (-0.56)
Con ol a iables Yes Yes Yes Yes Yes Yes
indus y and Yea
e ec s
Yes Yes Yes Yes Yes Yes
adj R20.5320 0.8651 0.7746 0.5165 0.8431 0.7686
obs 10,331 10,331 10,331 10,333 10,333 10,333
his able epo s he esul s on how go e nance mechanisms a ec he ela ionship be ween co po a e business s a egy and di idend pay-
men s. he akeo e suscep ibili y index is used as a p oxy o go e nance measu e. he -s a is ics a e p esen ed in pa en heses. supe sc ip s
*, **, and *** indica e signi icance le els o 10%, 5%, and 1%, espec i ely.
18 V. a. hOang e al.
yea s (Du ne , 2013), which induce i ms o pay high di idends. Fa ooq and ahmed (2019) also poin ou
ha highe di idend payou s a e associa ed wi h elec ion yea s ela i e o non-elec ion yea s. Pu suing
isky and inno a i e p ojec s, p ospec o i ms’ g ow h ou come seems mo e unce ain and pa icula ly
sensi i e o such unexpec ed changes ela i e o de ende coun e pa s (Ben ley e al., 2013; kes e ,
1984; Mye s, 1977; Rajagopalan, 1997). acco dingly, i is easonable o expec ha inc eased in o ma ion
asymme y and agency cos s a ising due o economic and poli ical unce ain y equi e p ospec o s o
pay highe di idends.
able 10 ou lines he indings ega ding he ela ionship be ween business s a egy and di idend pay-
men s, speci ically conside ing he in luence o U.s. policy unce ain y. economic policy unce ain y and
U.s. P esiden ial elec ions (ELECT) se e as p oxies o U.s. policy unce ain y in ou analysis. in Panel a,
we examine he impac o economic policy unce ain y on he di idend paymen s o p ospec o i ms.
he ePU a iable is de i ed om he mon hly economic policy unce ain y index de eloped by Bake
e al. (2016). subsequen ly, by using median alues o EPU, we ca ego ize i ms in o High EPU and Low
EPU g oups o each iscal yea . Ou esul s exhibi s a is ical signi icance in bo h he High EPU and Low
EPU g oups ega ding he impac o p ospec o s a egy on di idend paymen s. Pa icula ly, he coe i-
cien o PROSPECTOR is ma ginally highe o he high ePU g oup, aligning wi h he hypo hesis H3 ha
p ospec o i ms end o pay highe di idends unde condi ions o ele a ed policy unce ain y.
Panel B examines how ou main associa ion is impac ed by he U.s. p esiden ial elec ions. We use a
dummy a iable, aking he alue one i he Usa holds a p esiden ial elec ion in yea (ELECT) and ze o
o he wise (Non-ELECT). he coe icien s o he PROSPECTOR a iable a e highe and mo e signi ican a
he 1% and 10% le els in h ee al e na i e models o he ELECT g oup ha imply a s onge associa ion
be ween p ospec o business s a egy and di idend paymen s du ing he p esiden ial elec ions.
Meanwhile, his associa ion is insigni ican du ing non-elec ion pe iods o di idend paymen s p oxied by
DIVSALE and DIVCASH. hese indings suppo ou hi d hypo hesis.
7. Summa y and conclusion
his pape a gues he a icula ion be ween p ospec o s a egy and di idend policy om an agency
cos s pe spec i e. he i m’s decision as o whe he o dis ibu e p o i s o sha eholde s h ough
Table 10. Policy unce ain y, business s a egy and di idend paymen s.
Va iables
Panel a: economic policy unce ain y (EPU)
High EPU Low EPU
DIVEARN
(1)
DIVSALE
(2)
DIVCASH
(3)
DIVEARN
(4)
DIVSALE
(5)
DIVCASH
(6)
PROSPECTOR 0.0152 0.0003 0.0028 0.0126 0.0002 0.0026
(5.64)*** (3.42)*** (4.07)*** (3.64)*** (2.52)** (3.63)***
Cons an 0.0348 −0.0031 −0.0152 −0.0616 −0.0007 −0.0094
(0.79) (-2.04)** (-1.31) (-2.02)** (-0.93) (-1.22)
Con ol a iables Yes Yes Yes Yes Yes Yes
indus y and Yea
e ec s
Yes Yes Yes Yes Yes Yes
adj R20.5608 0.8553 0.7749 0.5529 0.7626 0.6984
obs 21,159 21,159 21,159 23,387 23,387 23,387
Panel B: P esiden ial elec ions (eLeC )
Va iables
eLeC non-eLeC
DIVEARN
(1)
DIVSALE
(2)
DIVCASH
(3)
DIVEARN
(4)
DIVSALE
(5)
DIVCASH
(6)
PROSPECTOR 0.0134 0.0002 0.0014 0.0093 0.001 0.0013
(4.71)*** (1.79)* (1.91)* (2.88)*** (0.04) (1.53)
Cons an −0.0321 −0.0009 −0.0128 −0.15 −0.0036 −0.0108
(-0.54) (-0.70) (-1.26) (-2.74)*** (-2.68)*** (-0.71)
Con ol a iables Yes Yes Yes Yes Yes Yes
Indus y and Yea
e ec s
Yes Yes Yes Yes Yes Yes
Adj R20.5042 0.86 0.7221 0.5732 0.7689 0.7797
Obs 15,072 15,072 15,072 44,474 44,474 44,474
his able epo s he esul s on how u.s. policy unce ain y a ec s he ela ionship be ween co po a e business s a egy and di idend pay-
men s. economic policy unce ain y and u.s. P esiden ial elec ions a e used as p oxies o u.s. policy unce ain y. he -s a is ics a e p esen ed
in pa en heses. supe sc ip s *, **, and *** indica e signi icance le els o 10%, 5%, and 1%, espec i ely.
cOgen BUsiness & ManageMen 19
di idends o o e ain p o i s o in es wi hin he i m is a sensi i e decision om an agency heo y
pe spec i e, since he e is a possibili y ha he managemen may e ain p o i s o sa is y hei own
a he han sha eholde s’ in e es s. Jensen (1986) demons a es ha a di idend ac s as a mechanism o
educe agency cos s, pa icula ly in i ms wi h subs an ial ee cash lows, by es ic ing managemen
access o such unds. Ou co e con en ion is ha i ms wi h a p ospec o s a egy expe ience highe
in o ma ion asymme y and, he e o e, pay mo e di idends han de ende i ms. We p o ide compelling
new e idence o indica e ha he p ospec o s a egy indeed has a signi ican and posi i e e ec on
di idend paymen s. Ou indings a e obus a e con olling o i m ixed e ec s, use o al e na i e
modeling app oaches, and me hods o add ess po en ial endogenei y issues ela ed o business s a egy.
We u he ind ha , gi en he impo ance o in es men and ee cash lows o agency- ela ed p ob-
lems, o e in es men and capi al expendi u e a e he unde lying channels d i ing he posi i e associa-
ion be ween p ospec o i ms and di idend paymen s. in addi ion o p o iding con incing suppo o
ou basic ene , we in es iga e how he posi i e ela ion be ween p ospec o s a egy and di idend pay-
men s di e s ac oss di e en in o ma ion and go e nance en i onmen s. We ind ha he ela ionship is
mo e p onounced o i ms wi h highe le els o in o ma ion asymme y and weak go e nance mecha-
nisms. Mo e impo an ly, we documen ha he ela ionship is mo e a ec ed in imes o highe policy
unce ain y measu ed by economic policy unce ain y and p esiden ial elec ions.
his esea ch ca ies signi ican ele ance o a ious s akeholde s in he inancial landscape. Fi s ly,
he obse ed highe p opensi y o di idend paymen s in i ms employing p ospec o s a egies com-
pa ed o de ende i ms sugges s ha in es o s may bene i om inco po a ing s a egic conside a ions
in o hei s ock selec ion p ocess. Unde s anding a i m’s s a egic o ien a ion could se e as a aluable
indica o o i s likelihood o dis ibu e di idends, p o iding in es o s wi h insigh s in o po en ial income
planning. Fu he , he iden i ica ion o agency con lic issues ela ed o ee cash low in p ospec o i ms
sheds ligh on he complex ela ionship be ween s a egic decisions, inancial policies, and co po a e
go e nance. in es o s and inancial analys s should conside hese dynamics when e alua ing in es men
oppo uni ies, especially in en i onmen s cha ac e ized by weake in o ma ion and go e nance s uc u es
o heigh ened policy unce ain y.
While his esea ch makes aluable con ibu ions o unde s anding he nexus be ween business s a -
egy and di idend paymen s, we acknowledge ce ain limi a ions o i s indings. Fi s ly, he chosen ime
ame om 1995 o 2018 migh no ully cap u e mo e ecen shi s in business s a egies o changes in
he inancial landscape. Mo eo e , while he esea ch a emp s o add ess endogenei y h ough a ious
me hodologies such as i m ixed e ec s and PsM, he e may s ill be unobse ed a iables o omi ed
a iable bias ha could in luence he s udy’s ou comes. las ly, he s udy assumes a ional decision-making
by i ms in e ms o selec ing and execu ing hei business s a egies. howe e , beha io al biases, o ga-
niza ional poli ics, and cogni i e limi a ions among execu i es may in oduce de ia ions om pu ely
a ional choices ha he s udy does no explici ly add ess.
O e all, his s udy p o ides p omising di ec ions o u u e esea ch. a deepe in es iga ion o beha -
io al aspec s manipula ing s a egic decisions, including manage ial isk a i udes and managemen com-
munica ions, could p o ide a mo e hough ul unde s anding o he associa ion be ween business
s a egy and di idend paymen s. Fu u e esea ch could also ocus on al e na i e payou mechanisms
beyond di idends, such as sha e epu chases.
Acknowledgmen
he au ho s wish o hank collins n im (academic edi o ) and he anonymous e e ees o e y help ul commen s
and sugges ions. We hank P emkan h Puwanen hi en o sha ing his da a, he pa icipan s a he 2020 aus alasian
Finance and Banking con e ence, he 2021 Financial Ma ke s and co po a e go e nance con e ence, and he semi-
na a he Uni e si y o Danang, Uni e si y o economics, o e y ui ul commen s and sugges ions. all emaining
e o s a e ou own.
Au ho con ibu ions
all pe sons who mee au ho ship c i e ia a e lis ed as au ho s, and all au ho s ce i y ha hey ha e pa icipa ed
su icien ly in he wo k o ake public esponsibili y o he con en , including pa icipa ion in he concep , design,
20 V. a. hOang e al.
analysis, w i ing, o e ision o he manusc ip . concep ion and design o s udy: Vie anh hoang, hanh huong
nguyen, My hanh nguyen. analysis and/o in e p e a ion o da a: Vie anh hoang, hanh huong nguyen, My hanh
nguyen, Ba hanh uong. D a ing o he pape , e ising i c i ically o in ellec ual con en : Vie anh hoang, hanh
huong nguyen, My hanh nguyen, Ba hanh uong
Disclosu e s a emen
no po en ial con lic o in e es was epo ed by he au ho (s).
Funding
his esea ch is unded by Funds o science and echnology De elopmen o he Uni e si y o Danang unde p oj-
ec numbe B2021-Dn04-04.
Abou he au ho s
Vie Anh Hoang and My Hanh Nguyen a e senio lec u e s a Depa men o Banking, he Uni e si y o Danang,
Uni e si y o economics (Vie nam).
Thanh Huong Nguyen is a senio lec u e a Depa men o Finance, he Uni e si y o Danang, Uni e si y o economics
(Vie nam).
Ba Thanh T uong is a p o esso a Depa men o accoun ing, he Uni e si y o Danang, Uni e si y o economics
(Vie nam).
Da a a ailabili y s a emen
he da a ha suppo he indings o his s udy a e a ailable om he co esponding au ho upon easonable eques .
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