This paper aims to investigate the relation between corporate governance and dividend policy in Sri Lankan firms.
The data set consists of market data using 1,608 firm-year observations from 201 firms listed on the Colombo Stock Exchange and survey-based data from 151 respondents from the same 201 firms. The authors use data triangulation to examine the two approaches.
The analysis of the market data reveals that a significantly positive relation between corporate governance on both the propensity to pay dividends and dividend payout. Survey analysis confirms these findings. Triangulated evidence supports the outcome model of dividends, free cash flow and agency cost theories.
The findings are useful not only for management in developing suitable corporate governance practices and dividend policies for their firms but also for shareholders in evaluating both existing and new investments. Future researchers should investigate the same phenomenon in other contexts using triangulation approaches to confirm their findings.
This study is the first to use governance indices both in terms of survey and market-based data to examine the relation between corporate governance and dividend policy.
