臺大管理論叢 NTU Management Review VOL.28 NO.1

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臺大管理論叢 第 28 卷第 1 期
4. Regression Results
4.1 Control Divergence, Legal Institution, and Dividend Payout
This study empirically tests the prediction that the positive relationship between the
ultimate owner’s cash flow-control divergence and dividend payouts is less pronounced
for firms with good investor opportunities in countries in which legal investor protection
is strong. We develop a regression model that includes control divergence (Diverge), legal
institutions, growth opportunities, and the interactions between them. It adds firm- and
country-specific characteristics to minimize the confounding effects of potential error in
the measurement of the dividend payouts. The model also controls for the ultimate
owner’s cash flow rights (Own) and the interaction between Own and country-specific
institutional factors to ensure that the documented relationship between dividend payouts
and Diverge is not driven by the absence of Own. The generic regression model with firm
and time subscripts omitted takes the following form (with the predicted signs of the
regression coefficients).
PAYOUT = β0 + β1Diverge + β2 Institution + β 3Diverge×Institution + β4GxDiverge +
(?) (+) (+) (+) (+)
β5GxInstitution + β 6GxDiverge×Institution + β7Own + β8Own×Institution
(-) (-) (?) (?)
+ β 9G + β 10Size + β 11Leverage + β 12Ln(GNP) + β13LRes + β14 Dta +
(-) (?) (-) (?) (-) (+)
error term, (1)
where PAYOUT refers to each of the four dividend payout ratios (before and after the
adjustment for industry effects), and Institution represents country-specific legal
institutions such as Legal, Right, or Disclosure. G represents the measure of investment
opportunities. As firms with more investments make lower long-term dividend payouts
(Fama and French, 2002), we control for this by using the decile rank of the average
annual sales growth rate of each firm over the previous five years (G ).
In addition to cash flow rights ( Own), we include two other firm-level variables that
may affect a firm’s dividend policy: firm size (Size) and leverage (Leverage). Cash flow
rights may affect the ultimate owner’s incentive to pay out dividends, although the
empirical evidence is inconclusive (Farinha, 2003; Gugler, 2003). We control for the size
effect, which is defined as the natural logarithm of total assets in U.S. dollar at the end of