Corporate governance and dividend pay-out policy in UK listed SMEs: The effects of corporate board characteristics

Abstract

Purpose

The purpose of this paper is to examine the extent to which corporate board characteristics influence the level of dividend pay-out ratio using a sample of UK small- and medium-sized enterprises from 2010 to 2013 listed on the Alternative Investment Market.

Design/methodology/approach

The data are analysed by employing multivariate regression techniques, including estimating fixed effects, lagged effects and two-stage least squares regressions.

Findings

The results show that board size, the frequency of board meetings, board gender diversity and audit committee size have a significant relationship with the level of dividend pay-out. Audit committee size and board size have a positive association with the level of dividend pay-out, whilst the frequency of board meetings and board gender diversity have a significant negative relationship with the level of dividend pay-out. By contrast, the findings suggest that board independence and CEO role duality do not have any significant effect on the level of dividend pay-out.

Originality/value

This is one of the first attempts at examining the relationship between corporate governance and dividend policy in the UK’s Alternative Investment Market, with the analysis distinctively informed by agency theoretical insights drawn from the outcome and substitution hypotheses.

Citation

Elmagrhi, M.H., Ntim, C.G., Crossley, R.M., Malagila, J.K., Fosu, S. and Vu, T.V. (2017), "Corporate governance and dividend pay-out policy in UK listed SMEs: The effects of corporate board characteristics", International Journal of Accounting & Information Management, Vol. 25 No. 4, pp. 459-483. https://doi.org/10.1108/IJAIM-02-2017-0020