YoungKyung KO 1,*
1Center for Research and Consultancy, UNITAR International University, Malaysia
This study examines how the governance reform measures influence on corporate payout policy. The previous research shows that most of Korean firms controlled by family were less likely to pay cash dividends while the controlling shareholders tended to extract private benefits. From1998, Korean government introduced restructuring and reform policy following IMF’s conditionality in order to improve corporate governance. Regardless of performance, firms must meet criteria. The result shows that firms increase size of both payouts continuously while they increase the ratios of cash dividends to earnings and repurchase to earnings immediately after the corporate governance reform driven by the government is enforced. This implies enforced reform measure make temporary influence on corporate payout rather than corporate governance quality. In addition, whether firms pay cash dividends or repurchase shares depends on the ownership structure. Firms with higher foreign ownership and controlling shareholders’ ownership increase dividends and firms with less control rights spend more on share repurchase. The firms with less volatility of profits, large size, lower debt ratios, more cash flows, and higher capital expenditures are more likely to increase ratios of payouts after controlling growth opportunity, stock options and other events.
Keywords: corporate governance, payout policy, controlling shareholder, ownership structure, cash dividends, share repurchase.