Ownership structure, dividend policy, and financial performance: A causality analysis

Abstract

Most studies on corporate governance testing the relationship or correlation between ownership structure (OS), dividend policy (DP), and financial performance (FP). Little attention has, however, been paid to the direction of the causal relationship between financial performance and corporate governance variables (such as OS and DP). This study fills that gap by examining the direction of causality using the bootstrap panel Granger non causality tests to analyze panel data on selected listed firms in an emerging economy, namely, Tunisia. Based on a sample of 154 firm-year observations during the period 1996–2017 and using both Kónya’s (2006) and Dumitrescu and Hurlin’s (2012) approaches, results show the existence of both unidirectional and bidirectional significant causal link between the pair of used variables. These findings agree with earlier studies that found that causality runs from some corporate governance measures to financial performance, from the latter to the former, or in both senses