Journal of Economics and Management Volume 15, No. 1 February, 2019

Do Taiwanese Family Firms Have a Lower Propensity to Pay Cash Dividends? The Roles of Corporate Governance, Product Market Competition and Corporate Social Responsibility

Cho-Min Lin

Department of Finance, Providence University, Taiwan.

Min-Lee Chan

Department of Finance, Providence University, Taiwan.

Wen-Shin Fang

CTBC Bank, Taiwan.

Abstract

This study analyzes the effect of corporate governance, product market competition and corporate social responsibility on the cash dividend policies of family firms. Previous literature has mostly focused on the direct relationship between corporate governance and dividend policy without explicitly considering product market competition and corporate social responsibility. This study explores the relationship between the dividend payouts of family firms and corporate governance, product market competition and corporate social responsibility using the Tobit model on publicly listed Taiwanese family firms from 2005 to 2014. The empirical results show that Taiwanese family firms pay less cash dividends to shareholders; however, this negative dividend payout presents a nonlinear effect depending upon levels of corporate governance and corporate social responsibility; that is, a negative dividend payout by a family business can be moderated by better corporate governance quality or more corporate social responsibility. Additionally, we further discover that family businesses do exhibit different behaviors in dividend policies depending on whether they are high- or low-dividend payout firms. High-dividend family firms tend to reduce their dividend payout, while this negative dividend payout would be mitigated by better corporate governance. Low-dividend family firms tend to increase dividend payouts, and this positive payout is enhanced by stronger industry competition and a higher degree of corporate social responsibility (CSR). Attempts to combine all moderating factors together are first documented in the related literature and are discussed in depth in analyzing the dividend payout behavior of family businesses, which is a major contribution of this research.

Keywords：Family Firms, Cash Dividends, Corporate Governance, Product Market Competition, Corporate Social Responsibility.

JEL Classifications：G30, G34, G35.

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