Open AccessMedia Independence And Dividend Policy: Evidence From Emerging Stock Markets
Author(s) -
Omar Farooq,
Salma Dandoune
Publication year - 2012
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v28i5.7238
Subject(s) - dividend policy , dividend , independence (probability theory) , stock (firearms) , emerging markets , shareholder , dividend payout ratio , stock market , monetary economics , business , economics , financial economics , corporate governance , finance , mechanical engineering , paleontology , statistics , mathematics , horse , engineering , biology
Can media pressurize managers to disgorge excess cash to shareholders? Do firms in countries with more independent media follow different dividend policies than firms with less independent media? This paper seeks to answer these questions and aims to document the relationship between media independence and dividend policies in emerging markets. Using a dataset from twenty three emerging markets, we show a significantly negative relationship between dividend policies (payout ratio and decision to pay dividend) and media independence. We argue that independent media reduces information asymmetries for stock market participants. Consequently, stock market participants in emerging markets with more independent media do not demand as high and as much dividends as their counterparts in emerging markets with less independent media. We also show that press independence is more important in defining dividend policies than TV independence. Furthermore, our results show that the relationship between media independence and dividend policies is more pronounced in firms that generate greater interest from investors.