Critical mass of female directors, ownership structure and dividend payments

Abstract

This study examines the association between the critical mass of female directors (CMFD) and dividend payments and whether ownership concentration moderates this relationship. The main findings show that the CMFD improves corporate governance and consequently increases dividend payments, using one of the biggest datasets to date of Chinese listed firms, spanning the 2009–2022 period (32,925 firm-year observations). When we use propensity score matching, the instrumental variable technique, and the difference-in-difference approach to address possible endogeneity problems and numerous dividend payment proxies, the positive effect of CMFD on dividends is still there. Moreover, the relationship between ownership structure and dividend payments is mitigated through CMFD. Furthermore, we find that the CMFD increases the dividend payout at higher significance levels for firms with higher concentrated ownership, suggesting that CMFD acts as a strong internal governance device. The study analyzes results using a theoretical framework that incorporates concepts from critical mass and agency theories. Dividend payment is important, as the firms with entrenched managers and majority shareholder control hurt a firm’s ability to safeguard minority shareholder interest; therefore, it is important to have CMFD on board to monitor and control managers' expropriations and majority owners' control to have an optimal dividend policy in the firms.