Corporate Governance and Dividend Policy: A Critical Literature Review

Abstract

This article provides a critical review of the literature on the relationship between corporate governance and dividend policy. Building on debates around transparency, managerial discipline, and shareholder protection, the study highlights that dividends go beyond their purely financial function to serve as a governance tool, a signaling mechanism, and an institutional regulatory device. The analysis of major theoretical contributions (agency theory, signaling theory, institutional approaches, and stakeholder perspectives) reveals a rich yet fragmented conceptual foundation. Empirical findings remain mixed: while some studies confirm a positive effect of strong governance on dividend generosity and regularity, others report no clear association, or even inverse relationships depending on firms’ life cycle, ownership structures, or the use of alternative payout channels such as share repurchases. The role of contextual variables (legal systems, family ownership, firm size, institutional quality) underscores the contingent nature of the governance–dividend nexus. However, methodological limitations (endogeneity, imperfect governance measures, limited cross-country comparability) and epistemological constraints (dominance of the agency paradigm, neglect of informal and cultural dimensions) persist, restricting the cumulative advancement of knowledge. In conclusion, the article calls for an integrative re-reading that articulates micro, meso, and macro levels, and for the development of more holistic analytical frameworks able to capture the interplay between formal and informal mechanisms shaping dividend policy across diverse institutional environments.

Classification JEL : G34 & G35

Paper type : Theoretical Research