Board Financial Expertise,Managerial Ability,Economic Policy Uncertainty,and Dividend Policies By Public Companies

Numerous researchers have developed theories and studies to uncover the issues pertinent to dividend policy dynamics,but it is still one of the unresolved problems of finance.The purpose of this dissertation is to revisit divined policy from three new dimensions,i.e.,financial expertise on the corporate board,managerial ability,and economic policy uncertainty.The first dimension is financial expertise on the corporate board for explaining the dividend policy dynamics in the emerging equity markets of China and Pakistan.The study employs static(fixed effect&random effect)and dynamic models-two-step Generalized method of moments estimation techniques by Arellanno and Bond[1]and Arellanno and Bover[2].The study reveals that Chinese firms with more financial expertise on the board pay less dividend because they thought they could find better investment opportunities for shareholders,but Pakistani firms with high financial expertise on board pay higher dividends to better protect shareholders interest.Second dimension is managerial ability,we study what role managerial ability plays in dividend policy of an emerging market of China.Our empirical results indicate that firms with higher managerial ability are more likely to pay higher dividends.We also analyze the impact of managerial ability on dividend decisions by constructing our subsamples into three different ways 1)subsample consist of state owned and non-state owned enterprises,and our findings confirm that positive relationship between managerial ability and dividend decision is more significant for non-state owned enterprises,2)subsample consist of firms with high and less financially constraints,and with strong and weak balance sheet,and the findings confirm that positive relationship between managerial ability and dividend policy is more prevalent for firms with less financial constraints and with strong balance sheet,3)subsample comprises of high and low marketized groups,and our empirical results indicate that compared to low marketized groups,high marketized groups with higher managerial ability are more likely to pay higher dividend as compared to their counterparts.We further analyze the role of pre-crisis managerial ability on dividend policy decisions during global crisis and finds similar results.Third dimension is to study how economic policy uncertainty shape dividend policy of public listed firms.We first time examine the effect of economic policy uncertainty(EPU)on dividend sustainability-dividend termination and dividend initiation decision of firms.Our main result reveals that during high EPU past dividend payers are more likely to terminate dividends and past non-payers are less likely to initiate dividends.However,firms that rely more on internal finance,generate high return on invested capital and state-owned firms are less exposed to high EPU.Therefore,the negative(positive)effect of high EPU on firms' dividend initiation(dividend termination)decision is mitigated by considering firm heterogeneous characteristics.Our results also show that firms having high asset growth,retained earnings,profitability,cash holdings and high Tobin q are more likely to initiate dividend during period of high EPU and less likely to terminate dividend.In addition,effect of high EPU on dividend sustainability is higher for firms operating in high marketized regions relative to low marketized groups.We further analyze the moderating role of managerial ability,and board financial expertise on dividend sustainability during high EPU.Study results indicate that firms terminate dividend when the EPU is higher,but when board financial expertise&managerial ability introduced as a moderator,previously non-payer firms are more likely to initiate and previously payer firms are less likely to terminate dividend during high EPU.To reduce the problem of endogeneity of all three study dimensions,we employ several robustness test and produce similar results.Robustness test includes instrumental variable regression approach,generalized method of momentum,and model robustness tests.