Content area
Full text
Introduction
The importance of managerial abilities has intensified in recent years, as the quality of decisions and the vision of business leaders determine a business’s success. According to Demerjian et al. (2012), managing competence is an essential element of managerial effectiveness in transforming corporate resources into revenues, in line with the goal of wealth maximization. High-ability managers seem to do better than low-ability managers in a number of areas, including firm performance (Bertrand and Schoar, 2003; Cheung et al., 2017), accurate earnings forecasts (Baik et al., 2011), debt maturity decisions (Bui et al., 2018), capital structure (Zahid et al., 2024a), corporate investment opportunities (Lee et al., 2018; Shang, 2021), corporate sustainability performance (Khan et al., 2022; Zahid et al., 2024b), financial reporting quality and fraud prevention (Garcia et al., 2018). However, the managerial role in dividend decisions interferes with shareholders’ interests and voting power, as well as market regulations and corporate investment needs, and it represents a subject of debate and research, especially for emerging markets.
Considering the complexity of the dividend puzzle (Al-Najjar and Kilincarslan, 2016), consisting of multiple perspectives questioning the relevance, monitoring, and signaling role of dividends, as well as the fact that not all countries and tax systems encourage dividend payments nor all investors prefer dividend distribution (but rather capital gains from trading shares), there are mixed arguments about the role of managerial ability in dividend policy decisions (Jiraporn et al., 2016). On the one hand, managers often face pressure to deliver promising financial results, which could lead to the initiation of dividends and the expectation of continued dividend growth, thereby signaling promising future earnings and business performance (Liu and Chen, 2015). In line with the information asymmetry hypothesis (explaining that corporate insiders have access to more information than shareholders), managerial actions are interpreted as predicting the path of a business (Baik et al., 2011). Thus, financial markets often perceive dividend payouts as signs of persistent corporate performance, further dividends, and capital gains, or, on the contrary, an indication that the company intends to enhance equity financing and tries to look attractive to potential investors, from the perspective of share price fluctuation and share dilution (Yang et al., 2020). On the other hand, managers are also assumed to refrain from dividend...
|
|
|
|
|