TY - JOUR
T1 - Growth Opportunities, Information Asymmetry, and Dividend Payout
T2 - Evidence from Mandatory IFRS Adoption
AU - Agarwal, Nishant
AU - Chakraverty, Arkaja
PY - 2021/7/1
Y1 - 2021/7/1
N2 - We study how the relationship between a firm’s growth opportunities and its dividend policies shifts in response to a reduction in information asymmetry between investors and firms. Existing literature suggests a negative relationship between growth opportunities and dividend payouts in the presence of information asymmetry. Using the mandatory adoption of IFRS (International Financial Reporting Standards) as an exogenous shock to the information environment of a firm, we document that the negative relationship between growth opportunities and dividend payout strengthens. This suggests IFRS adoption improves capital allocation by shifting dividend demand towards low-growth firms and reducing dividend demand from high-growth firms.
AB - We study how the relationship between a firm’s growth opportunities and its dividend policies shifts in response to a reduction in information asymmetry between investors and firms. Existing literature suggests a negative relationship between growth opportunities and dividend payouts in the presence of information asymmetry. Using the mandatory adoption of IFRS (International Financial Reporting Standards) as an exogenous shock to the information environment of a firm, we document that the negative relationship between growth opportunities and dividend payout strengthens. This suggests IFRS adoption improves capital allocation by shifting dividend demand towards low-growth firms and reducing dividend demand from high-growth firms.
UR - http://www.scopus.com/inward/record.url?scp=85109286010&partnerID=8YFLogxK
U2 - 10.1080/09638180.2021.1938622
DO - 10.1080/09638180.2021.1938622
M3 - Article
JO - European Accounting Review
JF - European Accounting Review
SN - 0963-8180
ER -