Corporate governance and dividend policy in Southeast Asia pre- and post-crisis

The relationship between dividends and corporate governance in five East Asian countries over the period 1994-2003, comparing the outcome and substitute models, is investigated. Evidence of a pre-crisis negative relationship between dividends and governance indicates that dividends act as a substitute for other corporate governance mechanisms during this exuberant period. A strong positive relationship between governance and dividends emerges post-crisis, consistent with substantial improvements in governance empowering shareholders. The relationship is incremental to the effect of the legal regime, confirming that shareholder protection at the firm level is important to forcing firms to disgorge cash in an outcome model of dividends.