Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
975401 | Pacific-Basin Finance Journal | 2013 | 19 Pages |
•We study the link between competition and dividend of agency conflicts in Taiwan.•Intense competition protects investors in a poor investor protection economy.•Outcome agency model of dividends holds only when market is highly competitive.•Substitute agency model of dividends is supported when market has low competitiveness.•Competition alleviates the effects of agency conflicts on dividend policy.
We examine the link between the intensity of product market competition and the dividend models of agency conflicts in an economy with weak investor protection (Taiwan). Product market competition can substitute for governance mechanisms. Our results show that the outcome agency model of dividends is applicable only when the product market is highly competitive. However, the substitute agency model of dividends is supported when the product market has low competitiveness. Product market competition alleviates the effects of agency conflicts and corporate governance practices on dividend policies.