Minority shareholder protection and dividend policy: Evidence from the material industry

Abstract

This study investigates the impact of minority shareholder protection on corporate dividend policy. On one hand, strong minority shareholder protection can be associated with a reduction in dividend payment because shareholders want to receive more dividends to mitigate agency costs. On the other hand, weak minority shareholder protection can lead to an increase in dividend payment since shareholders, in order to protect themselves, may require the company to pay more dividends to compensate for weak minority shareholder protection. Our sample consists of 101 Vietnamese listed firms in the material industry during the period from 2015 to 2021. Employing a pooled ordinary least squares (OLS) model, we find a negative impact of minority shareholder protection on corporate dividend payment. To deal with the endogeneity problem, we apply a system generalized method of moments (GMM) method. The main result estimated from this method is qualitatively unchanged. The finding of this paper suggests that the manager of a company should enhance the corporate governance of the company to protect the minority shareholders.