The Impact of Corporate Governance Mechanisms (ownership structure and board structure) on Dividend Policy of Companies

Abstract

Based on the Agency literature, on the one hand, cash dividends paid to shareholders reduce free cash flows and reduce the risk of investment in non-optimal investing projects, and on the other hand, increase constant control on managers by capital markets. Accordingly, interest payments as a policy maker-works to reduce conflict of interest. Hence, this study is about the survey of effect of mechanisms of Corporate Governance on the dividend policy of the companies accepted by the Tehran Stock Exchange. Four hypotheses represented to test this effect. The population of this study involves all listed companies of the Tehran Stock Exchange. Taking consideration the limitations of the sample of the present study, 71 companies selected as the sample of this study. The present study discusses mentioned companies from 2009 to 2013. The methodology of this study involves using the past information. Using statistical methods, regression analysis using combined data by fixed- effects.

The obtained results of this study are indicative that is not a meaningful relation between the mechanisms of Corporate Governance and the rate of dividend.

Keywords: Corporate governance, outside boards, institutional ownership, and agency theory.