Corporate dividend policy, minority shareholders right and equity value of firm: Evidence from Singapore

The purpose of the paper is to find out empirically whether an ideal business environment coupled with adequate legal protection provides an enabling mechanism for the minority shareholders to extract dividend from the firms and, as a consequence, whether the equity value of the firms gets impacted by dividend policy. The study (a) employs Tobit model on a sample of FTSE ST companies of Singapore to show the relation between dividend and minority shareholders base and, then (b) sought to explore the relation between equity value and dividend policy in the backdrop of strong legal protection for minority shareholders through OLS and 2 SLS regression models. The study empirically demonstrates a positive relation between the dividend payout and minority shareholders base indicating that, in a civil law origin country with strong corporate governance code ensuring investors protection and property right, the minority shareholders can extract dividend from the firms that, in turn, has a favourable impact on equity valuation. Consistent with the "outcome" and "catering model," the findings of the study indicate that the overall business environment and legal protection enable minority shareholders to assert their cash flow rights with positive valuation implication. The paper objectively reveals how superior business environment, good governance and property right impact inter-play between dividend payout, minority shareholders base and valuation of a civil law country.