Political institutions, stock market liquidity and firm dividend policy : Some international evidence

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

6 Scopus Citations
View graph of relations


Related Research Unit(s)


Original languageEnglish
Article number100180
Journal / PublicationJournal of Contemporary Accounting and Economics
Issue number1
Online published24 Dec 2019
Publication statusPublished - 1 Apr 2020


In this cross-country study, we draw on the dividend liquidity hypothesis and the political economy literature to examine whether political institutions affect the relationship between stock market liquidity and a firm's dividend policy. In countries with weak political institutions, we expect that investors are less able to demand higher dividends for stocks with low liquidity. Using a sample of 52 countries, we show that the negative association between stock market liquidity and dividends is more pronounced in countries with sound political institutions, consistent with the “outcome” model of dividends. These results are stronger in countries with better legal institutions and weaker for firms with financial constraints.

Research Area(s)

  • Dividend policy, Legal institutions, Political institutions, Stock market liquidity