The Effect of Board of Directors’ Characteristics on the Dividend Policy for US Listed Firms

Abstract

The purpose of this study is to examine whether the board of directors' characteristics impact dividend policy using a sample of US listed firms. This study uses two dividend policy measures (dividend payment declaration and dividend yield) and two main regressions (Logistic and Tobit regressions) to test the extent to which firms’ board size, gender diversity, board independence, age of directors, board meeting frequency and CEO duality have an effect the dividend payout policy after controlling for firm size, leverage, profitability, cash flow, and investment and future growth. Additionally, this study uses random effect Logistic and Tobit regressions to validate the study’s outcomes. Based on a sample of 398 non-financial and non-utility US firms listed on the Standard and Poor’s 500 index for the period 2012 to 2022, it was found that dividend policy is positively affected by gender diversity, while board size, independence, age, meeting frequency and CEO duality had shown mixed findings. The results suggest that firms tend to pay higher dividends with the presence of female directors on the board, which is also consistent with the outcome theory that states that female directors tend to utilise dividends as a monitoring tool to mitigate agency costs and ensure the protection of shareholders’ rights.