Impact of Good Governance on Dividend Payout Ratio: Moderated Mediation Effect of legal Origin and Corporate Reputation

Abstract

This study investigates whether legal origin moderates the relationship between corporate governance and dividend payout policies, mediated by corporate reputation, among Fortune 500 firms (2014–2022). Corporate governance, reputation, and dividend payout significantly impact corporate finance. Nevertheless, their combined influence across legal systems, especially common-law versus civil-law jurisdictions, remains underexplored. This quantitative study analyzed panel data of 324 Fortune 500 companies, yielding 2,808 firm-year observations across common-law and civil-law countries. Corporate governance and financial data were collected from Bloomberg, reputation rankings from Fortune, and country-level controls from the World Bank. Statistical analysis involved panel regressions and moderated mediation models. Robustness checks employed alternative dividend measurements and verification tests. Common-law countries exhibited strong governance enhancing corporate reputation and subsequently increasing dividends. Conversely, civil-law jurisdictions demonstrated weaker governance impacts, diminished reputational influence, and lower dividend payouts. Common-law regulators and managers should reinforce governance standards to sustain dividends via reputation. Civil-law jurisdictions must improve investor protections and governance frameworks for similar effectiveness.