Media independence and dividend policy: Evidence from emerging markets

Can media pressurize managers to disgorge excess cash to shareholders? Do firms in countries with more independent media follow different dividend policies than firms with less independent media? This paper seeks to answer these questions and aims to document the relationship between media independence and dividend policies in emerging markets. Using a dataset from twenty three emerging markets, we show a significantly negative relationship between dividend policies (payout ratio and decision to pay dividend) and media independence. We argue that independent media reduces information asymmetries for stock market participants. Consequently, stock market participants in emerging markets with more independent media do not demand as high and as much dividends as their counterparts in emerging markets with less independent media. We also show that press independence is more important in defining dividend policies than TV independence. Furthermore, our results show that the relationship between media independence and dividend policies is more pronounced in firms that generate greater interest from investors.