The role of corporate governance in debt and dividend policies: case of Slovakia
-
DOIhttp://dx.doi.org/10.21511/imfi.16(2).2019.18
-
Article InfoVolume 16 2019, Issue #2, pp. 206-217
- Cited by
- 1410 Views
-
195 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Do good corporate governance practices affect the amount of intermediated debt used by corporations and their dividend payout decisions? This study addresses the direct effects of corporate governance practices on both the indebtedness and the dividend pay-outs in corporations listed on the Bratislava Stock Exchange in 2015–2017 in Slovakia. Because of the relatively weakly developed stock market, the hypothesis is set only to found whenever there is a correlation between those variables. For analyzing the data, Spearman’s rank correlation was used because of the absence of normal distribution. Furthermore, authors adjusted the data set specifically in both cases to reflect more precisely the situation and increase the significance of the models. The most important result of this paper is the finding that the application of the corporate governance principles affects financial decisions of companies. There is a correlation between the responsible application of corporate governance principles and the total debt of companies. Also, there is a correlation between the responsible application of corporate governance principles and the amount of dividends paid to shareholders.
- Keywords
-
JEL Classification (Paper profile tab)G30, G32, G34, G35, M14
-
References40
-
Tables6
-
Figures0
-
- Table 1. Correlations between corporate governance index and debt (the case of first adjustment)
- Table 2. Correlations between Corporate Governance Index and indebtedness (2nd adjustment)
- Table 3. Correlations between Corporate Governance Index and dividend pay-outs
- Table A1. Evaluation of 1st, 2nd, 3rd and 4th criteria and results
- Table B1. Evaluation of 5th and 6th criteria and results
- Table C1. Evaluation of the 7th (7a, 7b, 7c) criteria and results
-
- Adjaoud, F., & Amar, W. B. (2010). Corporate Governance and Dividend Policy: Shareholders’ Protection or Expropriation? Journal of Business Finance & Accounting, 37(5-6), 648-667.
- Belas, J., Dvorsky, J., Kubalek, J., & Smrcka, L. (2018). Important factors of financial risk in the SME segment. Journal of International Studies, 11(1), 80-92.
- Berger, P. G., Oferk, E., & Yermack, D. L. (1997). Managerial entrenchment and capital structure decisions. The Journal of Finance, 52(4) 1411-1438.
- Blendinger, G., & Michalski, G. (2018). Long-term competitiveness based on value added measures as part of highly professionalized corporate governance management of German DAX30 corporation. Journal of Competitiveness, 10(2), 5-20.
- Bulathsinhalage, S., & Pathirawasam, Ch. (2017). The Effect of Corporate Governance on Firms Capital Structure of Listed Companies in Sri Lanka. Journal of Competitiveness, 9(2), 19-33.
- Chang, B., & Dutta, S. (2012). Dividends and Corporate Governance: Canadian Evidence. IUP Journal of Applied Finance, 18(4), 5-30.
- Chang, B., Dutta, S., Saadi, S., & Zhu, P. (2018). Corporate Governance and Dividend Payout Policy: Beyond country-level Governance. The Journal of Financial Research, 41(4), 445-484.
- Chen, W., Chung, H., Hsu, T., & Wu, S. (2010). External financing needs, Corporate Governance and firm value. Corporate Governance: An international review, 18(3), 234-249.
- Cuervo, A. (2002). Corporate Governance Mechanisms: a plea for less code of good governance and more market control. Corporate Governance an International Review, 10(2), 84-93.
- Day, J., & Taylor, P. (2004). Institutional change and debt‐based corporate governance: A comparative analysis of four transition economies. Journal of Management and Governance, 8(1), 73-115.
- Easterbrook, F. (1984). Two agency-cost explanations of dividends. American Economic Review, 74(4), 650-659.
- Elbadry, A. (2010). Corporate Governance and Asymmetric Information (284 p.). Germany: VDM Verlag Dr. Muller GmBH.
- Faccio, M., Lang, L. H. P., & Young, L. (2001). Debt and corporate governance (Working Paper). The Chinese University of Hong Kong.
- Francis, B. B., Hassan, I., John, K., & Song, L. (2011). Corporate Governance and Dividend Payout Policy: A Test Using Antitakeover Legislation. Financial Managment, 40(1), 83-112.
- Funchal, B., Galdi, F. C., & Lopes, A. B. (2008). Interactions between Corporate Governance, Bankruptcy law and firms debt financing: the Brazilian case. Brazilian Administration Review, 5(3), 245-259.
- Ghouma, H., Nasr, H. B., & Yan, R. (2018). Corporate governance and cost of debt financing: Empirical evidence from Canada. The Quarterly Review of Economics and Finance, 67, 138-148.
- Hart, O., & Moore, J. (1995). Debt and seniority: An analysis of the role of hard claims in constraining management. American Economic Review, 85(3), 567-585.
- Iskander, M. R., & Chamlou, N. (2000). Corporate Governance: A Framework for Implementation. World Bank Group, Washington: D.C.
- Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76, 323-329.
- Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
- Jiraporn, P., & Gleason, K. C. (2007). Capital Structure, Shareholder Rights, And Corporate Governance. The Journal of Financial Research, 30(1), 21-33.
- Jiraporn, P., & Ning, Y. (2006). Dividend Policy, Shareholder Rights, and Corporate Governance.
- Jiraporn, P., Kim, J. Ch., & Kim, Y. S. (2011). Dividend Payouts and Corporate Governance Quality: An Empirical Investigation. The Financial Review, 46(2), 251-279.
- Kliestik, T., Michalkova, L., & Kovacova, M. (2018). Is a tax shield really a function of net income, interest rate, debt and tax rate? Evidence from Slovak companies. Journal of International Studies, 11(4), 295-311.
- La Porta, R., Lopez De Salinas, F., Shleifer, A., & Vishny, R. (2000). Agency problems and dividend policy around the world. Journal of Finance, 55(1), 1-33.
- Mande, V., Park, Y. K., & Son, M. (2011). Equity or Debt Financing: Does Good Corporate Governance Matter? Corporate Governance an International Review, 20(2), 195-211.
- Monks, R. A. G., & Minow, N. (2011). Corporate governance. John Wiley & Sons.
- Mura, L., Haviernikova, K., & Machova, R. (2017). Empirical results of entrepreneurs’ network: Case study of Slovakia. Serbian Journal of Management, 12(1), 121-131.
- Musa, H., Musova, Z., & Debnarova, L. (2015). Responsibility in the Corporate Governance Framework and Financial Decision Making Process. Procedia Economics and Finance, 23, 1023-1029.
- Musa, H., Musova, Z., & Debnárová, L. (2018). Importance of Corporate Governance in Socially Responsible Behaviour of Enterprises. Entrepreneurship – Development Tendencies and Empirical Approach.
- Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
- OECD (2004). G20/OECD Principles of Corporate Governance.
- OECD. (2015). G20/OECD Principles of Corporate Governance.
- Peiró, N. G., & Gracia, J. L. (2016). Corporate Governance and Capital Structure: A Spanish Study. European Management Review, 14(1), 33-45.
- Rajan, R. G., & Winton, A. (1995). Covenants and collateral as incentives to monitor. Journal of Finance, 50(4), 1113-1146.
- Roubíček, L. (1998). Corporate governance. Ostrava: VSB – Technická univerzita.
- Sarkar, J., & Sarkar, S. (2008). Debt and corporate governance in emerging economies Evidence from India. Economics of Transition and Institutional Change, 16(2), 293-334.
- Silva, L. C., Goergen, M., & Renneboog, L. (2004). Dividend Policy and Corporate Governance. New York: Oxford University Press.
- Šuranová, Z., Saxunová, D., & Krištofík, P. (2009). Finančné účtovníctvo a riadenie s aplikáciou IAS/IFRS (767 p.). Bratislava: Iura Edition.
- Wen, Y., Rwegasira, K., & Bilderbeek, J. (2002). Corporate Governance and Capital Structure Decisions of the Chines Listed Firms. Corporate Governance an International Review, 10(2), 75-83.