Determinants of corporate governance.

Abstract

In this report, we investigate the determinants of corporate governance and the effects of dividend payout on CG. In the absence of strong corporate governance, dividends act as a control for inefficient managerial behavior. We traced the corporate governance development and dividend payout ratio in four Asian countries namely, Singapore, Malaysia, Hong Kong and Korea for the period 2002-2006. Our empirical results show that country level characteristics are better than firm level characteristics in explaining CG. We also deduced that dividends do not have a significant effect on a firm’s corporate governance. This means that the use of dividends as a form of control for agency cost is not that prevalent. Controls for corporate governance such as growth, profitability, leverage, ownership, firm size and ratio for cash holdings are taken into consideration in the empirical test.