This study aims to examine the impact of corruption on dividend payouts. It also examines the moderating effect of the audit committee and ownership structure on the relationship between corruption and dividend payouts.
This study uses a sample of 72 nonfinancial firms listed in the KSE 100 index from 2008 to 2021. It used feasible generalized least square to estimate dividend payout models. The generalized method of moments is applied as a robustness check.
The findings reveal that agency theory is important in determining dividend payouts. Notably, it shows that corruption is significantly negatively associated with dividend payout. The audit committee’s independence weakens the negative influence of corruption on dividend payout, whereas family and managerial ownership strengthen the negative influence of corruption on dividend payout. The results are robust to alternative estimation methods and measures.
This study has several practical implications for policymakers. It suggests taking a variety of measures to lessen the influence of corrupt activities on payout decisions. Policymakers should prioritize enhancing corporate governance mechanisms, emphasizing responsibility and transparency, and strictly sanctioning unethical behavior. In addition, policymakers should introduce laws that protect minority shareholders from concentrated family and managerial ownership.
To the best of the authors’ knowledge, this study is the first to examine how corruption affects dividend payouts in the context of Pakistan. In addition, it provides evidence concerning the role of the audit committee and ownership structure in the link between corruption and dividend payouts.
