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Information Disclosure, Product Market Competition and Payout Policy
Chien-Ting Lin*
Department of Finance
Deakin University
Burwood Victoria
Australia
Kung-Cheng Ho
School of Finance
Zhongnan University of Economics and Law
Wuhan, Hubei, China
Shih-Cheng Lee
College of Management
Yuan Ze University
Taoyuan, Taiwan
and
Lee-Hsien Pan**
School of Business
SUNY Geneseo
New York, U.S.A.
*Corresponding Author
**Presenter at FMA
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Information Asymmetry, Product Market Competition and Payout Policy
Abstract
We examine the effects of information disclosure and product market competition on
payout policy. Using a unique and comprehensive information rating scheme based on 114
measures over five dimensions of information disclosure at each publicly listed firm in
Taiwan from 2005 to 2014, we find that information disclosure and product market
competition alone affect a firm’s payout decisions. In particular, payout can be an outcome
for information disclosure and product market competition. When examining both effects
together, we find that information disclosure and product market competition complement
each other in affecting corporate dividend policy. Our results suggest that governance
mechanism of information disclosure can be more effective for firms in competitive
industries.
JEL Classification: G30; G35
Keywords: payout policy; information disclosure; product market competition
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1. Introduction
An important issue related to corporate payout policy is information asymmetry and
agency problem. For decades, both accounting and finance researchers have been devoted
considerable attention to study the impacts of information asymmetry and agency problems
on corporate payouts. However, how payout policies can be affected by information
disclosure (a proxy for information asymmetry) and the agency problems alone and jointly
are unclear.
The accounting literature documents that firms with more information disclosure are
associated with more analyst followings (Lang and Lundholm (1993 and 1996), and
Debreceny and Rahman (2005)) and lower information asymmetry (Healy and Palepu (2001)
and Shroff et al. (2005)). Thus, firms disclosing more information are more likely to
experience lower cost of capital (Botosan and Plumlee (2002), and Francis, Nanda, and
Olsson (2008), and Cheynel (2013)), thereby distribute higher dividend payouts (Dewenter
and Warther (1998), Khang, and King (2006), Li and Zhao (2008), Andriosopoulos,
Andriosopoulos, and Hoque (2013)). Information disclosure can therefore be viewed as an
internal governance mechanism that mitigates principal-agency conflicts and information
risk due to the separation of managers and shareholders (Gillan (2006)).
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On the other hand, the finance literature tends to show that product market competition
lowers agency problems (Shleifer and Vishny (1997)) by reducing managerial slack (Giroud
and Mueller (2011)) and removing incompetent managers (Allen and Gale (2000)). Greater
competition may lead to higher managerial effort as shareholders are better informed about
the managers’ behaviors. In this context, product market competition works as an external
governance mechanism through which agents are forced to align their interests with those of
the principals (Gillan (2006)).
La Porta et al. (2000) examine the impact of corporate governance on dividend policies
by testing two hypotheses, the outcome hypothesis and the substitution hypothesis. The
former argues that firms with better governance may pay higher dividends to mitigate agency
problems, while the latter states that firms with poor governance may pay higher payouts to
establish good reputation. Given that information disclosure and product market competition
are two governance mechanisms, one internal and the other external, the follow-up questions
to consider are how different governance mechanisms affect corporate payout policy? How
does information disclosure interact with product market competition in affecting the
corporate payout policy? Does the former complements or substitutes the latter in reducing
the conflicts of interests between managers and shareholders, thereby affecting dividend
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payout?
Our questions are motivated by the existing empirical papers that suggest agency
problems may not be adequately mitigated alone by the governance mechanisms such as
accounting information, product market competition, and increased disclosure levels
mandated by Securities and Exchange Commission (Shleifer and Vishny (1997), Sloan
(2001), and Solomon and Lublin (2004)). By considering the joint effect of information
disclosure and product market competition on a payout policy, our study sheds light on the
debate over whether monitoring complements information disclosure (Bens (2002)) or
whether disclosure of voluntary information inhibits a firm’s competitive position (Healy and
Palepu (1993), and Elliott and Jacobson (1994)).
In this paper, we take advantage of a unique dataset from Securities and Futures Institute
of Taiwan (SFI) that use 114 indicators over five different dimensions of information
disclosure to measure a firm’s corporate transparency.1 These 114 indicators are used to
evaluate and assign each firm one of the seven information rating scores by a research team
consisting of accounting and finance professions, academic researchers, in-house research
staff, and IT personnel. A firm with a higher (lower) information rating is said to have greater
1 The five dimensions of information disclosure include 1) compliance with mandatory information disclosures, 2) timeliness of information reporting, 3) disclosure of
financial forecast, 4) disclosure of annual report, and 5) disclosure of corporate website.
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(lesser) information disclosure. Other sophisticated proxies for information disclosure such
as those compiled by Association for Investment Management and Research (AIMR) and
Center for International Financial Analysis and Research (CIFAR) are limited to larger
companies and less comparable across industries (e.g. Francis, Khurana, and Pereira (2005),
Brown and Hillegeist (2007)). On the contrary, the level of information disclosure in this
study is based on the same set of criteria, which applies to all of the public listed firms across
different industries. Therefore, it provides a more consistent and comprehensive measure of
information disclosure for various group of firms.
Besides, the measurements of information disclosure in this study are more intuitive,
comprehensive, and meaningful. Prior empirical studies use firm size and book-to-market
equity (e.g. Lang and Ludholm (1993)), analyst coverage and dispersion of analysts’ forecasts
(Piotroski and Roulstone (2005), and Cheng et al. (2006)), market microstructure measures
(Heflin et al. (2005) and Ecker et al. (2006)) to measure the degree of a firm’s information
transparency. However, these measures can be bias. For example, while a large firm may
signal lower information asymmetry, it may simply reflect its business life cycle. Similarly,
a firm with higher market-to-book equity may be driven by higher growth opportunity rather
than lower information asymmetry.
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Our empirical analysis yields the following results. First, we find that firms with higher
information disclosure tend to increase payout amount. This supports the outcome hypothesis
that information transparency acts as an internal governance mechanism. Second, we find
that firms operating in competitive market are more likely to have higher corporate payouts,
which supports the outcome hypothesis. More importantly, combining the effects of
information disclosure and product market competition reveals that these two governance
mechanisms complement each other in reducing agency problems, thereby increasing the
level of dividend payouts. Thus, the outcome hypothesis is substantiated. Our results remain
robust after controlling for a number of proxies such as firm characteristics and other
corporate governance measures.
The remainder of the paper is organized as follows. The background of information
disclosure in Taiwan is displayed in Section 2. Literature review and hypotheses development
are shown in Section 3. Data, sample, and methodology are presented in Section 4. Empirical
results are demonstrated in Section 5 and Section 6 concludes the paper.
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2. Brief History of Information Disclosure in Taiwan
The company law and the security law in Taiwan were first established in 1919 and 1968
respectively to define the rights and responsibilities of the firms and the interests of
shareholders and bondholders. However, neither of these laws were adequate to protect the
interests of shareholders and bondholders as the judicial system in Taiwan is poorly ranked
compared with those in the German law origin (La Porta et al. (1998)). The Asian financial
crisis in 1997 and a number of high profile corporate scandals such as Enron and WorldCom
in the early 2000’s has prepared the way for imposing stronger governance mechanisms. As
a result, the Sarbanes-Oxley Act in the U.S. in 2002 and similar governance regulations
requiring stricter regulatory compliance around the world have emerged.
In Taiwan, in response to the call for a strict governance mechanism for publicly listed
companies, Taiwan’s Securities and Futures Institute (SFI), a quasi-government entity
entrusted by the Taiwan Stock Exchange (TSE) and the Gre-Tai Securities Market (GTSM),
developed the Information Disclosure and Transparency Ratings System in 2003 to assess
the level of information disclosure for publicly listed firms. The rating score is based on 114
indicators over five dimensions of information disclosure that include (1) compliance with
the mandatory information disclosure, (2) timeliness of information reporting, (3) disclosure
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of financial forecast, (4) disclosure of annual report, and (5) disclosure of corporate website.
Appendix A reports the number of indicators in each dimension of the information disclosure.
Appendix B lists the 114 disclosure indicators used to compile the transparency scores for
each sample firm. Essentially, each indicator is a question related to a firm’s information
disclosure with a “yes” or “no” answer. Similar to the governance index (G-index) proposed
by Gompers et al. (2003) to evaluate a firm’s level of anti-takeover provisions, one point is
given with a “yes” answer and zero otherwise. A firm’s total score is the sum of the points
earned from the 114 indicators. A score ranging from C- (the lowest corporate transparency)
to A+ (the highest corporate transparency) for each of the rated firms from 2005 to 2010 was
released by SFI. 2 Starting from 2011, the score scheme is expanded from C- to A++.
Therefore, we standardize the information rating score over the sample period for
compatibility of information disclosure. The mapping of information ratings and their
corresponding scores is displayed in Appendix C.
To ensure the accuracy and reliability of information disclosure measurements, SFI
provides the score for each of the 114 indicators and the overall information ratings to every
2 The full-year ranking results are accessible to the general public through the website of the Securities and
Futures Institute at http://www.sfi.org.tw.
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rated firm before releasing to the public.3 If a firm disagrees with the initial assessment, it
can file a report and express its areas of concern to the evaluation committee for further
review. A revised assessment is given if at least two thirds of the committee members are
present and the majority of the attendants agree with the revision. The two-way
communication between the rated firms and the evaluation committee members improves the
accuracy and objectivity of the information results. The ratings should therefore represent the
most comprehensive measurements for information disclosure.
3. Literature review and hypothesis development
3.1 Information disclosure and payout decision
Li and Zhao (2008) examine how information asymmetries affect a firm’s dividend
payouts. They find that firms with lower quality of information environment are associated
with lower level of dividends. Petrasek (2012) examines the relation between payout and
agency costs. He finds that cross-listed firms tend to increase cash payouts to shareholders.
His finding suggests that higher payouts are the outcome of better transparency and
shareholder protection. Similarly, Andriosopoulos et al. (2013) use data from UK regulatory
3 The scores for each dimension of information disclosure are unavailable to the public and our results are
limited to the overall rating of the information disclosure.
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and disclosure environment to examine the relation between information disclosure and the
share buyback completion rate. Their results show that information disclosure increases share
repurchases. Consistent with the above arguments, Adjaoud and Ben-Amar (2010)
investigate the relationship between corporate governance quality and dividend payouts.
They find that board composition and shareholder rights’ policy are positively associated
with payouts. Their results show that firms with stronger governance tend to pay higher
dividends to mitigate the agency problem. Their finding supports the outcome hypothesis
proposed by La Porta et al. (2000). It follows that firms with higher level of information
disclosure are more likely to use higher dividends as a way to mitigate agency problems.
Based on these considerations, we establish our first hypothesis as follows.
H1: Information disclosure is positively related to dividend payouts.
3.2 Product market competition and payout decision
Product market competition has long been considered an alternative source of corporate
governance that resolves the conflicts between shareholders and managers (Alchian (1950),
Stigler (1958), and Leibenstein (1966)). Similar to the monitoring role of corporate
governance, product market competition can be regarded as a disciplinary force that reduces
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the amount of managerial slack and fosters technology adoption and firm growth (Shleifer
(1986), Shleifer and Vishny (1997), Aghion et al. (1999), and Allen and Gale (2000)).
Chevalier (1995) and Phillips (1995) document that competition reduces managerial shirking,
thus leading to increased management effort, firm efficiency and performance. Therefore, the
discipline role of product market competition should reduce agency conflicts. Motivated by
the empirical results that document the negative relation between product market competition
and agency problems, Grullon and Michaely (2007) examine whether such relation has any
implication for a firm’s payout policy. They find that firms in less competitive industries
experience lower payout ratios than those in competitive industries. Following the findings
by Grullon and Michaley (2007), He (2012) confirms that firms in more competitive
industries are more likely to pay higher level of dividends.
Despite the discipline role of product market competition in reducing agency problems,
Scharfstein (1988) and Schmidt (1997) argue that competition may not necessarily increase
managerial effort. Their results suggest that when competition starts to increase, the
managerial effort may increase initially. However, when competition exceeds a threshold, the
discipline role of product market competition may decrease. As a result, managerial slack
could increase if the marginal benefits of inducing higher effort is smaller than the costs of
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mitigating agency problems. Booth and Zhou (2015) conduct a comprehensive empirical
study to examine the relation between market power and dividend policy. They find that the
impact of competition on a firm’s risk helps explain the dividend policy. In contrast to the
outcome hypothesis of dividend policy, their results suggest that managers of firms in
competitive market have incentive to spend corporate resources for the benefit of themselves,
rather than distribute cash to shareholders. In a similar vein, Gerard et al. (2014) examine
how corporate payout policy is influenced by the product market threats. They show that
competition decreases firm’s incentive to distribute dividends or repurchase shares,
especially for firms with limited access to financial markets.
With the opposing arguments, the second hypothesis can be developed as follows:
H2a: Product market competition is positively related to dividend payouts.
H2b: Product market competition is negatively related to dividend payouts.
3.3 Information disclosure and product market competition
Given that information disclosure and product market competition are considered
important monitoring mechanisms that reduce agency problems, we examine how the level
of information disclosure affects the dividend policy of the firms across different levels of
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competitive markets. In particular, we are interested in examining whether information
disclosure complements or substitutes product market competition as a market for corporate
control. Literature regarding how information disclosure and product market competition
interacts in mitigating agency problems is mixed.
Darrough and Stoughton (1990) analyze the incentives for voluntary disclosure of
proprietary information. Their model predicts that voluntary disclosure can be increased
when product market competition increases. Bens (2002) examines the factors associated
with the amount of information disclosed about corporate restructurings for U.S. firms during
1990-1993. He finds that disclosure levels increased substantially in 1993 when the Securities
and Exchange Commission (SEC) required greater scrutiny for firms undergoing
restructurings. His results indicate that information disclosure increases when shareholder
governance increases, suggesting that information disclosure complements shareholder
monitoring. In a related study, Knyazeva and Knyazeva (2012) examine whether product
market competition complements or substitutes shareholder rights protection. They find that
the benefits of shareholder rights protection are present for firms in competitive environment.
Their results indicate that product market competition strengths shareholder rights protection
by facilitating the detection of the underperformed managers. Their findings suggest a
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complementary relation between the external control of product market competition and
internal control of shareholder rights protection. The above discussions suggest that
information disclosure may serve as a complement for product market competition in
reducing agency problems, thus leading to higher payout ratios.
On the other hand, Healy and Palepu (1993) argue that one way managers can improve
the quality of financial reporting is to provide additional disclosures such as non-financial
leading indicators and the articulation of company’s long-term strategy. The disclosure of
proprietary information on a company’s prospect and strategy may hurt the competitive
advantage of the firm as competitors could use the information to improve their competitive
position as well. Therefore, managers face a tradeoff between the advantage of disclosing
valuable information for investors and the cost of disclosing proprietary information to
competitors. Similarly, Elliott and Jacobson (1994) analyze the costs and benefits of
information disclosures and they document that information disclosure can strengthen public
relations and help investors, creditors, and analysts get good impressions about companies’
openness. Their findings suggest that disclosure would weaken a company’s ability in
generating cash flows as competitors can learn something from the proprietary information
such as segment sales, product development, and managerial and technological innovation.
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These arguments suggest that there is a substitute relation between information disclosure
and product market competition.
Recent studies examining the relation between information disclosure and product market
competition yield similar results. Beyer et al. (2010) argue that the disclosure of corporate
information can be costly if the information is propriety. Hence, the governance mechanism
may decrease if proprietary information is disclosed to the competitors. Giroud and Mueller
(2010 and 2011) show that firms with weak governance tend to have lower productivity and
higher input costs, but only in non-competitive industries. Chhaochharia et al. (2012) use the
Sarbanes Oxley Act (SOX) as a natural experiment to test the relationship between product
market competition and governance mechanisms. They find that the passage of SOX helps
improve the operation of firms in non-competitive industries than in competitive industries.
These findings indicate that information disclosure may serve as a substitute for product
market competition in reducing agency problems, thus leading to higher payout ratios.
Given that information disclosure may complement or substitute product market
competition in affecting corporate payouts, our third hypothesis can be stated as follows.
H3a: The relationship between information disclosure and payout policy is stronger for
firms in competitive industries.
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H3b: The relationship between information disclosure and payout policy is weaker for
firms in competitive industries.
4. Data and methodology
4.1 Sample selection and summary statistics
Our data covers all of the firms listed on Taiwan Stock Exchange and Gre Tai Securities
Market during 2005 to 2014. Variables such as dividend payouts, firm characteristics, product
market competition, and agency based measurements are collected from Taiwan Economic
Journal (TEJ). The information disclosure scores are obtained from SFI’s website. Financial
and utility industries were excluded from the sample because the operations and the
regulations imposed on the firms in these industries are not comparable with those of other
industries. Our final sample includes 1,568 firms and 11,941 firm-year observations over the
period of 2005-2014.
Table 1 reports the distribution of sample firms by industry. Since Taiwanese firms are
characterized by high-tech industries, it is not surprising that electronic components,
semiconductor, photoelectric, and computer peripherals represent 12.95%, 9.12%, 8.10%,
and 7.44%, respectively. The remaining 62.5% of the sample are evenly distributed across 26
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industries. Overall, our sample is not skewed toward firms in particular industries.
The summary statistics of explanatory variables, company characteristics, and agency-
based proxies for the sample firms are displayed in Table 2. Ranging from 1 to 7, the mean
and median of IR are 3.59 and 3.00, respectively with a standard deviation of 1.18. It appears
that most of the firms have lower than average information rating, suggesting that SFI’s rating
on firms’ information disclosure is strict. The mean and median of Herfindahl Hirschman
Index (HHI, the sum of squared market shares) are 0.14 and 0.09, respectively with first (third)
quartile of 0.06 (0.15). The distribution of the alternative proxy for competition measured by
the sum of the sales of the big four firms divided by total sales of the market in the same
industry (CR4) is similar to that of HHI. It suggests that most of the sample firms operate in
a competitive market, despite some of the firms are highly concentrated. The standard
deviations of HHI and CR4 are 0.16, and 0.18, respectively. The variation in the measures of
competition therefore provides a good sample to examine the effect of information rating on
firms across different levels of competition. For dividend payout ratios, we use both cash
dividends and total payouts (the sum of cash dividends and shares repurchase) scaled by a
firm’s market value of assets or book value of assets as the measurements. The mean of
dividend payout ratios is greater than the median of those for all of the four measures (DIV1,
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DIV2, TPAY1, and TPAY2), suggesting that most of the sample firms distribute lower than
average dividend payouts. The minor difference between cash dividends (DIV) and the sum
of cash dividends and shares repurchase (TPAY) suggests that Taiwanese firms prefer to use
cash dividends rather than shares repurchase to distribute earnings to shareholders. On
average, firms in Taiwan perform well with average return on equity (PF) and sales growth
(GROWTH) of 12% and 49%, respectively. In general, the sample firms are older, have low
debt to equity ratio and only 1% of the firms are crossly listed on U.S. stock exchanges.
With respect to agency-based measurements, largest shareholding percentage (SLS) and
managers’ shareholding percentage (SMS) on average stand for 2.27% and 1.07% of total
outstanding shares, respectively. The mean of total family shareholdings (TFS) is 33.95,
which characterizes the dominating role of controlling family in Taiwanese firms. The times
of seating to cash flow rights measured by the ratio of seating rights to cash flow rights (TSC)
on average is 12.86, which characterizes the significant difference between control and
ownership rights among the Taiwanese firms. The average of excess of critical control level
(ECL) and critical control level (CCL) are 53.62, and 4.65, respectively. It indicates that the
divergence between cash flow rights and control rights is so large that the shareholdings of
controlling family are much lower than those needed for controlling the firms. The average
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percent increase of the available securities (STOCK DIV) is 0.19 with 99th percentile of 2.00,
suggesting that stock dividends are less common for firms in Taiwan. The average
shareholding percentage from the relatives of the directors, supervisors, and top management
represents (RELATE) is 1.17%, suggesting that the relatives of the executive members and
top managers have little influence on the firm. Finally, the mean of the percentage of firms
having audit committee (AUDIT, a dummy variable equals one when a firm has Audit
Committee and zero otherwise) is 6%, suggesting that there is room for improvement in
internal monitoring mechanism for Taiwanese firms.
<Insert Table 2 here>
The correlation coefficients between independent variables are displayed in Table 3. The
correlations between the pairs of the independent variables appear to be low except the
correlation between IR and IRS. This is not surprisingly because IRS is the standardized
value of IR. Overall, the correlations among the explanatory variables are low and they
should not pose multi-collinearity problems.
<Insert Table 3 here>
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4.2 Methodology
To examine the effect of information disclosure and product market competition on a
firm’s dividend payout decision, we estimate the following panel regressions,
𝑃𝑎𝑦𝑜𝑢𝑡𝑠𝑖𝑡 = 𝛼 + 𝛽1𝐼𝑅𝑖𝑡 + 𝛽2𝐻𝐻𝐼𝑖𝑗𝑡 + 𝛾 𝑋𝑖𝑡 + 𝐷𝑌 + 𝐷𝐼 + 휀𝑖𝑡 (1)
where 𝑃𝑎𝑦𝑜𝑢𝑡𝑠𝑖𝑡 is the cash dividends or total payouts measured by the sum of cash
dividends and shares repurchase of firm i in year t, 𝐼𝑅𝑖𝑡 (𝐼𝑅𝑆𝑖𝑡) is the information rating
(the standardized information rating, defined as the difference between IR and the average of
IR, scaled by the standard deviation of IR), 𝐻𝐻𝐼𝑖𝑡 is the Herfindahl Hirschman Index
computed as the sum of squared market shares of firm i in industry j, 𝑋𝑖𝑡 is the vector of
control variables that include firm characteristics and agency-based measures, 𝐷𝑌 is the
year fixed effect, DI is the industry fixed effect, and 휀𝑖𝑡 is the error term. To address the
potential bias in the standard errors of a panel data due to residuals correlated across firms
and time, we estimate robust standard errors clustered according to Petersen (2009), Gow et
al. (2010), and Flannery and Hankins (2013).
22
We then consider the potential interacting effects between information disclosure and
product market competition on the corporate payout decisions of the sample firms. Following
Giroud and Mueller (2011), we estimate the following panel regressions,
𝑃𝑎𝑦𝑜𝑢𝑡𝑠𝑖𝑡 = 𝛼 + 𝛽𝑡(𝐼𝑅𝑖𝑡 ∗ 𝐻𝐻𝐼𝑖𝑡) + 𝛿𝑡𝐾𝑖𝑡 + 𝛾𝑡𝑋𝑖𝑡 + 𝐷𝑌 + 𝐷𝐼 + 휀𝑖𝑡 (2)
where 𝐼𝑅𝑖𝑡 ∗ 𝐻𝐻𝐼𝑖𝑡 measures the interaction effect of IR and competition, which is a (3x1)
vector of dummies for low, medium, and high levels of competition. 𝐾𝑖𝑡 are the HHI
dummies for lower and medium levels of competition, used to control for any direct effect of
competition on firm performance. The remaining variables 𝑋𝑖𝑡, 𝐷𝑌, 𝐷𝐼, and 휀𝑖𝑡 are
previously defined in Eq. (1).
5. Empirical results
5.1 Information disclosure and dividend payouts
We examine the impact of information disclosure on dividend payouts based on equation
(1) and present the results in Panel A of Table 4. Models 1 to 3 show that IR is positively
associated with cash dividends scaled by market value of assets. The positive relationship is
23
robust after controlling for variables related to firm characteristics and agency-based
measurements. Thus, an upgrade of IR is associated with an increase in cash dividends. Our
results are consistent with prior studies that firms with higher level of information disclosure
are more likely to distribute more dividends. Models 4-6 show that IR is positively associated
with cash dividends scaled by book value of assets. The positive relationship still holds after
controlling for firm characteristics and agency-based variables that could affect the dividend
payout ratios. In models 7-9, we examine the impact of IR on total payout measured by the
sum of cash dividends and shares repurchase scaled by market value of assets. As expected,
the relationship between IR and total payout is positive and significant. In models 10-12, we
re-examine the impact of IR on total payout measured by the sum of cash dividends and
shares repurchase divided by book value of assets. The positive relationship remains
significant after controlling for firm characteristics and agency-based variables.
For robustness checks, we examine the impact of IRS on dividend payouts by repeating
the same processes as the models 1-12 of Panel A in Table 4. The relationship between IRS
and dividend payouts is positive and significant for all of the models (models 1-12) of Panel
B in Table 4, suggesting that IRS is positively related to dividend payouts. Therefore, our
findings support hypothesis 1 that payout can be an outcome effect for information disclosure,
24
which is consistent with the outcome hypothesis proposed by La Porta et al. (2000),
<Insert Table 4 here>
5.2 Product market competition and dividend payouts
We examine the impact of product market competition on dividend payouts using
Herfindahl Hirschman Index (HHI) as a measure for the level of competition. A higher (lower)
HHI indicates a higher (lower) industry concentration, which represents a lower (higher)
level of competition. Panel A of Table 5 shows that HHI is negatively related to dividend
payouts for all of the models, regardless of the presence of IR, firm characteristics and
agency-based measurements. It suggests that firms in more competitive industries tend to
distribute more dividend payouts.
For robustness checks, we examine the impact of product market competition on
dividend payouts using the sum of the sales of the big four firms divided by total sales of the
market in the same industry (CR4) as an alternative proxy for the level of competition. A
higher (lower) CR4 represents a lower (higher) level of competition. As displayed in Panel
B of Table 5, the negative and significant relationship between CR4 and dividend payouts
25
stays for all of the models. Thus, consistent with the outcome hypothesis proposed by La
Porta et al. (2000), our results support hypothesis 2a that firms operating in more competitive
industries are more likely to pay more dividends to mitigate the agency problem arising from
the separation between ownership and control.
<Insert Table 5 here>
We further examine the effects of information disclosure and product market
competition on dividend payouts by incorporating both information disclosure and product
market competition into the models in equation (1) and present the results in Panel A of Table
6. The effect of IR on dividend payouts stay positive and significant while the impact of HHI
on dividend payouts remain negative and significant throughout models 1-12. In Panel B of
Table 6, we examine the effect of information disclosure and product market competition on
payout policies by replacing IR with IRS and find similar results. In Panel C of Table 6, we
use IR and CR4 as the proxies of information disclosure and product market competition,
respectively to test the impact of these two measures on payout policies. We find that the
signs of IR and CR4 are consistent with prior findings, though the impact of CR4 on payouts
26
is absorbed by the agency-based measurements in models 3, 6, 9, and 12. In panel D of Table
6, we use IRS and CR4 to examine the impacts of information disclosure and product market
competition, respectively on corporate payouts. As expected, results are consistent with prior
findings that information disclosure and product market competition have positive impacts
on dividend payouts.
5.3 The effect of information disclosure on dividend payouts across different levels of
competition
Finally, we examine the interacting effect of information disclosure and product market
competition on dividend payouts along with HHI dummies as additional control variables
based on equation (2) and present results in Panel A of Table 7. For all of the models, the
coefficients are insignificant for the interaction terms IR*HHI (high) and IR*HHI (medium),
while the coefficients are positive and significant for the interaction term IR*HHI (low).
Results are consistent regardless of the use of different payout ratios and other control
variables such as firm characteristics and agency-based measurements. It indicates that the
impact of information disclosure on corporate payouts is more pronounced for firms
operating in higher levels of competition.
27
For robustness check, we use standardized information rating (IRS) as an alternative
measure for information disclosure and show the results in Panel B of Table 7. The
coefficients are positive and significant for the interaction terms IR*HHI (low) for all of the
models, while the coefficients are marginally significant for the interaction terms IR*HHI
(medium) for models 4 and 6. In Panel C of Table 7, we use IR and CR4 to examine the
interacting effects of information disclosure and product market competition on dividend
payouts. Consistent with prior findings, we find that the positive effect of information
disclosure on a firm’s corporate payout policy is the most effective for firms operating at the
highest level of competition in product market. In Panel D of Table 7, we use IRS and CR4
as alternative proxies to examine their interacting effects on the payout policies of a firm. As
expected, the significant and positive signs of the interaction terms IRS*CR4 (low) remain
for all of the models.
Our results suggest that information disclosure mandated by the regulator and product
market competition imposed by the market are effective measures of corporate governance
mechanisms and they complement each other in mitigating the agency problems, thus leading
to higher payout ratios. Therefore, our findings support hypothesis 3a that governance
mechanism of information disclosure is more effective for firms in competitive industries,
28
which is consistent with the outcome hypothesis supported by La Porta et al. (2000).
<Insert Table 7 here>
6. Summary and conclusion
This paper contributes to the debate of existing literature over whether monitoring
complements information disclosure or whether information disclosure inhibits a firm’s
competitive position. Empirical studies suggest that agency problems may not be adequately
mitigated by a particular governance mechanism alone. By considering the joint effect of
different governance mechanisms, information disclosure from accounting literature and
product market competition from finance literature, our paper sheds light on how internal and
external governance mechanisms interact in affecting corporate payout policies.
Using a unique information rating scheme drawn from 114 measures over five
dimensions of information disclosure for all of the publicly listed firms in Taiwan during
2005-2014, we find that information disclosure and product market competition
complements each other in reducing the conflicts of interests between managers and
shareholders, thereby increasing dividend payouts. However, the monitoring role of
information disclosure is influential for firms operating in more competitive industries only.
29
Our findings suggest that the best policy in strengthening governance for firms is perhaps to
facilitate more competition than regulatory rules.
30
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Table 1
Distribution of firms by industry
This table reports the distribution of sample firms by industry. No. of firms (obs.) is the
number of firms (observations) in each industry. % of firms (obs.) represented is the
percentage of firms (observations) represented by each industry. The classifications of
industry are obtained and cross-checked from the Taiwan Stock Exchange, Gre-Tai
Securities Market, and Kimo-Yahoo website.
Industry no. of firms no. of obs. % of firms
represented
% of obs.
represented
1 Auto 6 50 0.38 0.42
2 Biotechnology and Medical Care 83 449 5.29 3.76
3 Building material and construction 74 584 4.72 4.89
4 Cement 7 69 0.45 0.58
5 Chemical Industry 39 344 2.49 2.88
6 Communications network operator 80 601 5.10 5.03
7 Computer Peripherals 115 906 7.33 7.59
8 Culture 19 119 1.21 1.00
9 Electric cables 18 149 1.15 1.25
10 Electric Machinery 75 589 4.78 4.93
11 Electronic access 43 369 2.74 3.09
12 Electronic Components 203 1,617 12.95 13.54
13 Finance and Insurance 40 327 2.55 2.74
14 Food 27 244 1.72 2.04
15 Glass ceramic 5 41 0.32 0.34
16 Information Services 35 283 2.23 2.37
17 Oil, Gas and Electricity 12 119 0.77 1.00
18 Other 100 649 6.38 5.44
19 Other electronics 77 594 4.91 4.97
20 Paper 7 70 0.45 0.59
21 Photoelectric 127 852 8.10 7.14
22 Plastics 29 261 1.85 2.19
23 Rubber 12 108 0.77 0.90
24 Securities 14 110 0.89 0.92
25 Semiconductor 143 1,016 9.12 8.51
26 Shipping 25 205 1.59 1.72
36
27 Sightseeing 25 149 1.59 1.25
28 Steel 43 363 2.74 3.04
29 Textile 55 493 3.51 4.13
30 Trade department 30 211 1.91 1.77
Total 1,568 11,941 100.00 100.00
37
Table 2 Summary statistics of sample firms This table reports descriptive statistics of explanatory variables, company characteristics, and
agency-based proxies for sample firms. The definitions of the variables are shown in detail
in Appendix D.
P1 Q1 MEDIAN MEAN Q3 P99 STD
IR 1.00 3.00 3.00 3.59 5.00 7.00 1.18
IRS -2.00 -0.68 -0.18 0.00 0.69 2.56 1.00
HHI 0.02 0.06 0.09 0.14 0.15 0.80 0.16
CR4 0.21 0.27 0.34 0.42 0.54 0.97 0.18
DIV1(%) 0.00 0.00 1.71 2.91 4.32 16.27 3.73
DIV2(%) 0.00 0.00 3.26 4.78 7.39 23.33 5.48
TPAY1(%) 0.00 0.00 1.92 3.18 4.67 17.52 3.99
TPAY2(%) 0.00 0.00 3.66 5.22 7.94 25.15 5.89
Sales (billions) 0.14 1.39 3.40 20.52 9.75 379.19 106.75
LEVERAGE 0.00 0.00 0.04 0.16 0.19 1.45 0.33
PF -0.28 0.06 0.12 0.12 0.17 0.50 0.06
GROWTH -0.60 -0.09 0.04 0.49 0.17 1.53 0.13
FIRM AGE 5.00 17.00 25.00 27.20 36.00 61.00 12.92
ADR 0.00 0.00 0.00 0.01 0.00 0.00 0.08
SLS (%) 0.00 0.00 0.00 2.27 0.00 35.79 7.22
SMS (%) 0.00 0.07 0.34 1.07 1.07 9.69 2.04
TFS (%) 9.33 20.28 30.45 33.95 44.23 81.84 17.15
TSC 2.97 8.12 11.39 12.86 15.87 37.01 7.06
ECL (%) 12.50 37.50 50.00 53.62 66.67 100.00 21.32
CCL (%) 0.00 0.00 0.00 4.65 0.03 53.29 11.65
STOCK DIV (%) 0.00 0.00 0.00 0.19 0.14 2.00 0.47
RELATE (%) 0.00 0.00 0.11 1.17 1.03 11.95 2.72
AUDIT 0.00 0.00 0.00 0.06 0.00 1.00 0.24
38
Table 3 Correlation coefficients between independent variables
This table reports the Pearson correlation coefficients between independent variables. Pearson’s correlation coefficients are below the diagonal, while the
Spearman’s rank correlation coefficients are above the diagonal. The definitions of the variables are shown in detail in Appendix D. The correlation coefficients
in baldface denote statistical significance at 5%.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19)
(1) IR 0.92 0.02 0.10 0.21 0.00 0.03 -0.01 0.00 0.09 -0.03 -0.02 -0.11 -0.17 -0.03 0.14 -0.02 -0.10 0.17
(2) IRS 0.96 0.00 -0.02 0.22 0.02 0.07 0.03 -0.05 0.09 -0.05 -0.01 -0.11 -0.18 0.02 0.14 0.09 -0.08 0.10
(3) HHI 0.00 -0.02 0.63 0.17 0.08 0.00 -0.03 0.24 -0.03 0.01 -0.10 0.13 -0.04 0.20 0.04 -0.04 -0.09 0.01
(4) CR4 0.06 0.03 0.35 0.11 0.15 0.00 -0.04 0.40 -0.05 0.07 -0.18 0.17 -0.02 0.21 0.07 -0.16 -0.15 0.07
(5) SIZE 0.14 0.14 0.10 0.04 0.31 0.37 0.17 0.14 0.12 -0.07 -0.06 -0.14 -0.53 0.25 0.21 0.12 -0.14 0.10
(6) LEVERAGE 0.03 0.04 0.00 0.16 0.05 0.26 0.02 0.12 0.03 -0.01 -0.06 -0.02 -0.26 0.14 0.04 0.01 -0.07 0.00
(7) PF 0.04 0.06 0.02 0.02 0.06 0.22 0.27 0.07 0.06 -0.07 0.08 0.02 -0.11 0.08 0.00 0.22 0.04 -0.02
(8) GROWTH -0.01 -0.01 -0.01 -0.01 0.00 0.00 0.00 -0.04 0.00 -0.02 0.06 -0.01 -0.01 0.01 0.00 0.25 0.03 0.00
(9) FIRM AGE 0.02 -0.01 0.12 0.43 0.02 0.09 0.05 0.00 -0.02 0.04 -0.15 0.23 -0.10 0.36 -0.03 -0.10 -0.07 -0.18
(10) ADR 0.11 0.11 -0.03 -0.05 0.12 0.01 0.05 0.00 -0.03 -0.03 -0.02 -0.06 -0.12 0.02 0.02 0.00 -0.01 0.12
(11) SLS -0.03 -0.05 -0.02 0.06 0.01 0.03 -0.04 0.02 0.01 -0.02 -0.10 0.24 0.22 0.04 0.03 0.00 -0.11 0.04
(12) SMS -0.06 -0.06 0.02 -0.04 -0.05 -0.06 0.01 0.00 -0.03 -0.03 -0.04 0.04 0.08 -0.23 -0.15 0.10 0.34 -0.01
(13) TFS -0.11 -0.11 0.08 0.19 -0.06 -0.02 0.00 -0.01 0.17 -0.05 0.27 0.19 0.46 0.19 -0.33 0.02 0.14 -0.10
(14) TSC -0.14 -0.15 0.05 -0.02 -0.18 -0.14 -0.07 0.01 -0.13 -0.10 0.26 0.11 0.41 -0.10 -0.02 -0.01 0.07 -0.03
(15) ECL -0.02 0.03 0.06 0.30 0.09 0.14 0.06 0.00 0.36 0.02 0.03 -0.11 0.17 -0.07 0.24 -0.01 -0.19 -0.10
(16) CCL 0.12 0.12 0.02 0.05 0.04 0.04 0.03 0.00 -0.07 -0.02 0.04 -0.10 -0.31 0.28 0.14 -0.04 -0.29 0.07
(17) STOCK DIV -0.02 0.03 -0.01 -0.06 0.05 -0.05 0.12 0.00 -0.09 -0.01 0.03 0.01 0.04 0.04 -0.01 -0.03 0.07 -0.03
(18) RELATE -0.07 -0.07 -0.01 -0.05 -0.05 -0.05 -0.01 0.00 -0.05 -0.01 -0.01 0.21 0.21 0.10 -0.10 -0.15 0.01 -0.09
(19) AUDIT 0.20 0.14 -0.04 0.00 0.09 0.01 -0.02 0.00 -0.16 0.12 0.06 -0.03 -0.07 0.00 -0.11 0.07 -0.02 -0.04
39
Table 4 The impact of information disclosure on dividend payouts
This table reports the impact of information disclosure on dividend payouts. All models are based on equation (1). The definitions of the variables are shown in
detail in Appendix D. T values are reported in parentheses. *, **, *** denote statistical significance at 10%, 5%, and 1%, respectively.
Panel A: The impact of information disclosure (IR) on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.037 *** -0.021 0.003 0.055 *** -0.027 0.004 0.037 *** -0.013 0.020 0.055 *** -0.014 0.028
(4.50) (-0.97) (0.13) (4.29) (-0.79) (0.10) (4.02) (-0.53) (0.80) (3.79) (-0.37) (0.72)
IR 0.001 ** 0.001 ** 0.001 ** 0.001 *** 0.001 ** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 ***
(2.18) (2.11) (2.10) (2.38) (2.31) (2.37) (2.56) (2.49) (2.45) (2.59) (2.51) (2.55)
SIZE -3.981 -4.108 5.742 6.056 -3.015 -3.422 8.026 8.021
(-0.70) (-0.72) (0.65) (0.69) (-0.48) (-0.54) (0.81) (0.81)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.012 *** -0.013 *** -0.015 *** -0.015 ***
(-9.20) (-9.23) (-7.26) (-7.24) (-9.67) (-9.80) (-7.24) (-7.30)
PF 0.005 *** 0.006 *** 0.008 ** 0.009 *** 0.007 *** 0.007 *** 0.010 *** 0.011 ***
(2.34) (2.52) (2.28) (2.40) (2.55) (2.82) (2.58) (2.77)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.35) (-0.34) (-0.28) (-0.26) (-0.29) (-0.28) (-0.22) (-0.19)
FIRM AGE 0.006 ** 0.004 0.008 * 0.006 0.005 * 0.003 0.007 0.004
(2.15) (1.53) (1.94) (1.40) (1.66) (0.90) (1.45) (0.81)
ADR 0.046 *** 0.051 *** 0.040 ** 0.046 *** 0.049 *** 0.053 *** 0.043 ** 0.048 ***
(4.14) (4.55) (2.33) (2.68) (3.97) (4.23) (2.23) (2.45)
SLS -0.002 -0.009 -0.002 -0.009
40
(-0.40) (-1.09) (-0.32) (-0.97)
SMS 0.029 0.046 0.048 ** 0.076 **
(1.50) (1.58) (2.26) (2.30)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
(-3.68) (-3.18) (-2.94) (-2.45)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.12) (-1.71) (-3.60) (-3.01)
ECL 0.000 0.000 0.000 0.000
(-0.83) (-0.11) (-1.30) (-0.57)
CCL 0.000 0.000 0.000 0.000
(-1.20) (-0.50) (-0.91) (-0.30)
STOCK DIV 0.000 0.000 0.000 0.000
(0.20) (0.40) (-0.59) (-0.17)
RELATE 0.052 *** 0.079 *** 0.065 *** 0.105 ***
(3.72) (3.66) (4.20) (4.33)
AUDIT -0.002 -0.005 ** -0.002 -0.004 *
(-1.54) (-2.15) (-1.17) (-1.71)
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
41
Panel B: The impact of standardized information disclosure (IRS) on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.040 *** -0.019 0.005 0.058 *** -0.027 0.007 0.040 *** -0.010 0.023 0.059 *** -0.010 0.033
(4.80) (-0.87) (0.22) (4.60) (-0.68) (0.21) (4.36) (-0.41) (0.91) (4.13) (-0.25) (0.83)
IRS 0.001 ** 0.001 ** 0.001 ** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.002 *** 0.002 *** 0.002 ***
(2.17) (2.10) (2.08) (2.40) (2.33) (2.38) (2.58) (2.51) (2.46) (2.61) (2.54) (2.57)
SIZE -3.942 -4.071 5.808 6.122 -2.964 -3.373 8.106 8.100
(-0.69) (-0.71) (0.66) (0.70) (-0.47) (-0.53) (0.82) (0.82)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.012 *** -0.013 *** -0.015 *** -0.015 ***
(-9.20) (-9.23) (-7.26) (-7.24) (-9.67) (-9.80) (-7.24) (-7.30)
PF 0.005 *** 0.006 *** 0.008 ** 0.009 *** 0.007 *** 0.007 *** 0.010 *** 0.011 ***
(2.35) (2.52) (2.28) (2.41) (2.56) (2.83) (2.59) (2.78)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.36) (-0.34) (-0.29) (-0.26) (-0.30) (-0.28) (-0.22) (-0.19)
FIRM AGE 0.006 ** 0.004 0.008 * 0.006 0.005 * 0.003 0.007 0.004
(2.15) (1.53) (1.94) (1.40) (1.65) (0.90) (1.45) (0.80)
ADR 0.046 *** 0.051 *** 0.040 ** 0.046 *** 0.049 *** 0.053 *** 0.043 ** 0.048 ***
(4.14) (4.55) (2.32) (2.67) (3.96) (4.23) (2.22) (2.44)
SLS -0.002 -0.009 -0.002 -0.009
(-0.40) (-1.08) (-0.32) (-0.97)
SMS 0.029 0.046 0.048 ** 0.076 **
(1.50) (1.58) (2.26) (2.30)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
42
(-3.68) (-3.18) (-2.94) (-2.45)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.12) (-1.71) (-3.60) (-3.01)
ECL 0.000 0.000 0.000 0.000
(-0.84) (-0.11) (-1.30) (-0.57)
CCL 0.000 0.000 0.000 0.000
(-1.20) (-0.50) (-0.90) (-0.29)
STOCK DIV 0.000 0.000 0.000 0.000
(0.20) (0.40) (-0.59) (-0.17)
RELATE 0.052 *** 0.079 *** 0.065 *** 0.105 ***
(3.71) (3.66) (4.20) (4.33)
AUDIT -0.002 -0.005 ** -0.002 -0.004 *
(-1.53) (-2.15) (-1.16) (-1.70)
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
43
Table 5 The impact of product market competition on dividend payouts
This table reports the impact of product market competition on dividend payouts. All models are based on equation (1). The definitions of the variables are shown
in detail in Appendix D. T values are reported in parentheses. *, **, *** denote statistical significance at 10%, 5%, and 1%, respectively.
Panel A: The impact of product market competition (HHI) on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.042 *** -0.018 0.007 0.062 *** -0.027 0.011 0.043 *** -0.007 0.026 0.064 *** -0.005 0.038
(5.02) (-0.80) (0.30) (4.87) (-0.58) (0.32) (4.68) (-0.30) (1.03) (4.46) (-0.13) (0.97)
HHI -0.015 ** -0.015 ** -0.015 ** -0.027 *** -0.028 *** -0.028 *** -0.022 *** -0.023 *** -0.022 *** -0.036 *** -0.038 *** -0.038 ***
(-2.13) (-2.14) (-2.07) (-2.46) (-2.61) (-2.58) (-2.89) (-2.94) (-2.87) (-2.98) (-3.15) (-3.10)
SIZE -2.612 -2.816 8.303 8.537 -0.938 -1.437 11.493 11.378
(-0.46) (-0.49) (0.94) (0.97) (-0.15) (-0.23) (1.15) (1.14)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.013 *** -0.013 *** -0.015 *** -0.015 ***
(-9.23) (-9.26) (-7.29) (-7.28) (-9.71) (-9.85) (-7.28) (-7.35)
PF 0.005 *** 0.006 *** 0.008 ** 0.009 *** 0.007 *** 0.007 *** 0.010 *** 0.011 ***
(2.38) (2.56) (2.32) (2.45) (2.60) (2.87) (2.63) (2.82)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.34) (-0.32) (-0.27) (-0.24) (-0.28) (-0.26) (-0.20) (-0.17)
FIRM AGE 0.006 ** 0.004 0.008 * 0.006 0.005 * 0.003 0.007 0.004
(2.17) (1.54) (1.96) (1.41) (1.67) (0.90) (1.47) (0.81)
ADR 0.047 *** 0.052 *** 0.041 *** 0.047 *** 0.050 *** 0.053 *** 0.044 ** 0.048 ***
(4.22) (4.61) (2.40) (2.74) (4.04) (4.29) (2.29) (2.49)
SLS -0.003 -0.010 -0.003 -0.011
(-0.54) (-1.25) (-0.50) (-1.16)
44
SMS 0.026 0.041 0.044 ** 0.069 **
(1.36) (1.41) (2.06) (2.09)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
(-3.63) (-3.12) (-2.87) (-2.38)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.20) (-1.80) (-3.69) (-3.11)
ECL 0.000 0.000 0.000 0.000
(-0.82) (-0.09) (-1.28) (-0.54)
CCL 0.000 0.000 0.000 0.000
(-1.23) (-0.54) (-0.94) (-0.34)
STOCK DIV 0.000 0.000 0.000 0.000
(0.20) (0.39) (-0.60) (-0.19)
RELATE 0.051 *** 0.078 *** 0.064 *** 0.104 ***
(3.67) (3.61) (4.15) (4.28)
AUDIT -0.002 -0.005 ** -0.002 -0.004
(-1.44) (-2.05) (-1.06) (-1.59)
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
45
Panel B: The impact of product market competition (CR4) on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.048 *** -0.005 0.017 0.073 *** -0.027 0.028 0.056 *** 0.016 0.047 * 0.084 *** 0.032 0.070 *
(5.33) (-0.22) (0.73) (5.22) (0.02) (0.77) (5.57) (0.64) (1.79) (5.34) (0.79) (1.71)
CR4 -0.017 ** -0.017 *** -0.015 ** -0.028 *** -0.029 *** -0.025 ** -0.031 *** -0.031 *** -0.028 *** -0.047 *** -0.049 *** -0.044 ***
(-2.27) (-2.35) (-2.00) (-2.43) (-2.54) (-2.22) (-3.76) (-3.86) (-3.45) (-3.72) (-3.84) (-3.45)
SIZE -3.450 -3.715 6.629 6.730 -2.066 -2.673 9.501 9.193
(-0.60) (-0.65) (0.75) (0.77) (-0.33) (-0.42) (0.96) (0.93)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.013 *** -0.013 *** -0.015 *** -0.015 ***
(-9.23) (-9.26) (-7.29) (-7.27) (-9.72) (-9.85) (-7.29) (-7.35)
PF 0.006 *** 0.006 *** 0.008 *** 0.009 *** 0.007 *** 0.008 *** 0.011 *** 0.012 ***
(2.42) (2.59) (2.36) (2.48) (2.66) (2.93) (2.69) (2.88)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.34) (-0.33) (-0.27) (-0.24) (-0.28) (-0.26) (-0.21) (-0.17)
FIRM AGE 0.005 * 0.004 0.007 * 0.005 0.004 0.002 0.005 0.002
(1.96) (1.37) (1.73) (1.23) (1.32) (0.61) (1.12) (0.52)
ADR 0.043 *** 0.048 *** 0.034 ** 0.042 *** 0.042 *** 0.047 *** 0.033 * 0.039 *
(3.80) (4.26) (1.99) (2.39) (3.38) (3.71) (1.67) (1.95)
SLS -0.003 -0.010 -0.003 -0.011
(-0.55) (-1.24) (-0.54) (-1.19)
SMS 0.026 0.041 0.043 ** 0.068 **
(1.35) (1.41) (2.01) (2.05)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
46
(-3.67) (-3.18) (-2.94) (-2.45)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.08) (-1.67) (-3.50) (-2.92)
ECL 0.000 0.000 0.000 0.000
(-0.84) (-0.11) (-1.28) (-0.55)
CCL 0.000 0.000 0.000 0.000
(-1.22) (-0.52) (-0.93) (-0.32)
STOCK DIV 0.000 0.000 0.000 0.000
(0.15) (0.34) (-0.70) (-0.29)
RELATE 0.051 *** 0.077 *** 0.063 *** 0.102 ***
(3.63) (3.57) (4.08) (4.21)
AUDIT -0.002 -0.004 * -0.001 -0.004
(-1.33) (-1.92) (-0.87) (-1.41)
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
47
Table 6 The impact of information disclosure on dividend payouts at the presence of product market competition
This table reports the effect of information disclosure on dividend payouts under the influence of the competition in product market. All models are based on
equation (1). The definitions of the variables are shown in detail in Appendix D. T values are reported in parentheses. *, **, *** denote statistical significance at
10%, 5%, and 1%, respectively.
Panel A: The impact of information disclosure (IR) on dividend payouts at the presence of product market competition (HHI)
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.039 *** -0.018 0.006 0.058 *** -0.021 0.009 0.040 *** -0.009 0.024 0.060 *** -0.007 0.036
(4.72) (-0.84) (0.25) (4.54) (-0.63) (0.26) (4.33) (-0.35) (0.98) (4.11) (-0.18) (0.91)
IR 0.001 ** 0.001 ** 0.001 ** 0.001 ** 0.001 ** 0.001 ** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 ***
(2.13) (2.06) (2.05) (2.32) (2.25) (2.31) (2.49) (2.42) (2.38) (2.52) (2.43) (2.47)
HHI -0.015 ** -0.015 ** -0.015 ** -0.026 *** -0.028 *** -0.028 *** -0.022 *** -0.023 *** -0.022 *** -0.036 *** -0.038 *** -0.038 ***
(-2.12) (-2.13) (-2.07) (-2.44) (-2.58) (-2.56) (-2.87) (-2.92) (-2.86) (-2.95) (-3.12) (-3.09)
SIZE -2.663 -2.828 8.207 8.503 -1.002 -1.453 11.380 11.340
(-0.46) (-0.49) (0.93) (0.96) (-0.16) (-0.23) (1.14) (1.14)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.012 *** -0.013 *** -0.015 *** -0.015 ***
(-9.22) (-9.25) (-7.28) (-7.27) (-9.70) (-9.84) (-7.27) (-7.34)
PF 0.005 *** 0.006 *** 0.008 ** 0.009 *** 0.007 *** 0.007 *** 0.010 *** 0.011 ***
(2.34) (2.52) (2.27) (2.41) (2.55) (2.83) (2.58) (2.78)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.36) (-0.34) (-0.28) (-0.26) (-0.30) (-0.28) (-0.22) (-0.19)
FIRM AGE 0.006 ** 0.004 0.008 * 0.006 0.005 0.003 0.007 0.004
(2.12) (1.50) (1.90) (1.37) (1.62) (0.86) (1.41) (0.76)
ADR 0.045 *** 0.050 *** 0.038 ** 0.044 *** 0.047 *** 0.051 *** 0.041 ** 0.045 **
48
(4.06) (4.45) (2.23) (2.56) (3.86) (4.11) (2.11) (2.31)
SLS -0.003 -0.010 -0.003 -0.011
(-0.50) (-1.20) (-0.45) (-1.11)
SMS 0.026 0.042 0.044 ** 0.070 **
(1.37) (1.42) (2.08) (2.11)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
(-3.63) (-3.12) (-2.88) (-2.38)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.15) (-1.75) (-3.64) (-3.06)
ECL 0.000 0.000 0.000 0.000
(-0.78) (-0.04) (-1.23) (-0.49)
CCL 0.000 0.000 0.000 0.000
(-1.21) (-0.52) (-0.93) (-0.32)
STOCK DIV 0.000 0.000 0.000 0.000
(0.14) (0.33) (-0.66) (-0.26)
RELATE 0.052 *** 0.079 *** 0.065 *** 0.105 ***
(3.72) (3.66) (4.21) (4.33)
AUDIT -0.002 -0.005 ** -0.002 -0.005 *
-1.566 -2.188 -1.207 -1.748
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
49
Panel B: The impact of standardized information disclosure (IRS) on dividend payouts at the presence of product market competition (HHI)
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.042 *** -0.016 0.008 0.062 *** -0.018 0.013 0.043 *** -0.006 0.027 0.064 *** -0.002 0.040
(5.01) (-0.74) (0.34) (4.85) (-0.53) (0.36) (4.66) (-0.24) (1.08) (4.44) (-0.06) (1.02)
IRS 0.001 ** 0.001 ** 0.001 ** 0.001 *** 0.001 ** 0.001 ** 0.001 *** 0.001 *** 0.001 *** 0.002 *** 0.002 *** 0.002 ***
(2.12) (2.05) (2.03) (2.34) (2.27) (2.32) (2.51) (2.44) (2.39) (2.54) (2.47) (2.49)
HHI -0.015 ** -0.015 ** -0.015 ** -0.026 *** -0.028 *** -0.028 *** -0.022 *** -0.023 *** -0.022 *** -0.036 *** -0.038 *** -0.038 ***
(-2.11) (-2.13) (-2.06) (-2.43) (-2.58) (-2.56) (-2.87) (-2.92) (-2.86) (-2.95) (-3.12) (-3.08)
SIZE -2.626 -2.792 8.268 8.564 -0.954 -1.407 11.455 11.414
(-0.46) (-0.49) (0.94) (0.97) (-0.15) (-0.22) (1.15) (1.15)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.012 *** -0.013 *** -0.015 *** -0.015 ***
(-9.22) (-9.25) (-7.28) (-7.27) (-9.70) (-9.84) (-7.27) (-7.34)
PF 0.005 *** 0.006 *** 0.008 ** 0.009 *** 0.007 *** 0.007 *** 0.010 *** 0.011 ***
(2.35) (2.52) (2.28) (2.41) (2.56) (2.84) (2.58) (2.78)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.36) (-0.34) (-0.29) (-0.26) (-0.30) (-0.28) (-0.22) (-0.19)
FIRM AGE 0.006 ** 0.004 0.008 * 0.006 0.005 0.003 0.007 0.004
(2.12) (1.50) (1.90) (1.36) (1.61) (0.85) (1.41) (0.76)
ADR 0.045 *** 0.050 *** 0.038 ** 0.044 *** 0.047 *** 0.051 *** 0.041 ** 0.045 **
50
(4.06) (4.45) (2.23) (2.56) (3.85) (4.11) (2.11) (2.31)
SLS -0.003 -0.010 -0.003 -0.010
(-0.49) (-1.20) (-0.45) (-1.11)
SMS 0.026 0.042 0.044 ** 0.070 **
(1.37) (1.42) (2.08) (2.10)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
(-3.63) (-3.13) (-2.88) (-2.38)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.15) (-1.75) (-3.64) (-3.06)
ECL 0.000 0.000 0.000 0.000
(-0.78) (-0.04) (-1.23) (-0.49)
CCL 0.000 0.000 0.000 0.000
(-1.21) (-0.52) (-0.92) (-0.31)
STOCK DIV 0.000 0.000 0.000 0.000
(0.14) (0.33) (-0.66) (-0.26)
RELATE 0.052 *** 0.079 *** 0.065 *** 0.105 ***
(3.72) (3.66) (4.20) (4.33)
AUDIT -0.002 -0.005 ** -0.002 -0.005 *
-1.559 -2.182 -1.201 -1.742
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
51
Panel C: The impact of information disclosure (IR) on dividend payouts at the presence of product market competition (CR4)
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.040 *** 0.082 *** 0.078 *** 0.059 *** 0.117 *** 0.109 *** 0.044 *** 0.080 *** 0.076 *** 0.065 *** 0.114 *** 0.106 ***
(4.67) (3.17) (3.02) (4.45) (2.93) (2.74) (4.60) (2.78) (2.63) (4.35) (2.54) (2.35)
IR 0.001 ** 0.001 ** 0.001 ** 0.001 *** 0.001 ** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 ***
(2.18) (2.11) (2.10) (2.38) (2.31) (2.37) (2.56) (2.49) (2.45) (2.59) (2.51) (2.55)
CR4 -0.022 -0.809 ** -0.590 -0.032 -1.126 ** -0.828 -0.053 *** -0.729 * -0.435 -0.081 *** -1.005 -0.607
(-1.38) (-2.22) (-1.61) (-1.31) (-2.00) (-1.46) (-3.07) (-1.80) (-1.07) (-2.98) (-1.59) (-0.95)
SIZE -3.981 -4.108 5.742 6.056 -3.015 -3.422 8.026 8.021
(-0.70) (-0.72) (0.65) (0.69) (-0.48) (-0.54) (0.81) (0.81)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.012 *** -0.013 *** -0.015 *** -0.015 ***
(-9.20) (-9.23) (-7.26) (-7.24) (-9.67) (-9.80) (-7.24) (-7.30)
PF 0.005 *** 0.006 *** 0.008 ** 0.009 *** 0.007 *** 0.007 *** 0.010 *** 0.011 ***
(2.34) (2.52) (2.28) (2.40) (2.55) (2.82) (2.58) (2.77)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.35) (-0.34) (-0.28) (-0.26) (-0.29) (-0.28) (-0.22) (-0.19)
FIRM AGE 0.006 ** 0.004 0.008 * 0.006 0.005 * 0.003 0.007 0.004
(2.15) (1.53) (1.94) (1.40) (1.66) (0.90) (1.45) (0.81)
ADR 0.046 *** 0.051 *** 0.040 ** 0.046 *** 0.049 *** 0.053 *** 0.043 ** 0.048 ***
(4.14) (4.55) (2.33) (2.68) (3.97) (4.23) (2.23) (2.45)
SLS -0.002 -0.009 -0.002 -0.009
(-0.40) (-1.09) (-0.32) (-0.97)
SMS 0.029 0.046 0.048 ** 0.076 **
52
(1.50) (1.58) (2.26) (2.30)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
(-3.68) (-3.18) (-2.94) (-2.45)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.12) (-1.71) (-3.60) (-3.01)
ECL 0.000 0.000 0.000 0.000
(-0.83) (-0.11) (-1.30) (-0.57)
CCL 0.000 0.000 0.000 0.000
(-1.20) (-0.50) (-0.91) (-0.30)
STOCK DIV 0.000 0.000 0.000 0.000
(0.20) (0.40) (-0.59) (-0.17)
RELATE 0.052 *** 0.079 *** 0.065 *** 0.105 ***
(3.72) (3.66) (4.20) (4.33)
AUDIT -0.002 -0.005 ** -0.002 -0.004 *
-1.537 -2.153 -1.168 -1.706
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
53
Panel D: The impact of standardized information disclosure (IRS) on dividend payouts at the presence of product market competition (CR4)
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.041 *** 0.082 *** 0.079 *** 0.060 *** 0.118 *** 0.110 *** 0.045 *** 0.081 *** 0.076 *** 0.066 *** 0.115 *** 0.107 ***
(4.76) (3.19) (3.05) (4.54) (2.96) (2.77) (4.71) (2.81) (2.67) (4.46) (2.58) (2.39)
IRS 0.001 ** 0.001 ** 0.001 ** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.001 *** 0.002 *** 0.002 *** 0.002 ***
(2.17) (2.10) (2.08) (2.40) (2.33) (2.38) (2.58) (2.51) (2.46) (2.61) (2.54) (2.57)
CR4 -0.011 -0.797 ** -0.579 -0.013 -1.106 ** -0.808 -0.039 *** -0.713 * -0.420 -0.058 ** -0.981 -0.583
(-0.72) (-2.19) (-1.58) (-0.58) (-1.97) (-1.43) (-2.38) (-1.76) (-1.03) (-2.28) (-1.55) (-0.92)
SIZE -3.942 -4.071 5.808 6.122 -2.964 -3.373 8.106 8.100
(-0.69) (-0.71) (0.66) (0.70) (-0.47) (-0.53) (0.82) (0.82)
LEVERAGE -0.011 *** -0.011 *** -0.013 *** -0.013 *** -0.012 *** -0.013 *** -0.015 *** -0.015 ***
(-9.20) (-9.23) (-7.26) (-7.24) (-9.67) (-9.80) (-7.24) (-7.30)
PF 0.005 *** 0.006 *** 0.008 ** 0.009 *** 0.007 *** 0.007 *** 0.010 *** 0.011 ***
(2.35) (2.52) (2.28) (2.41) (2.56) (2.83) (2.59) (2.78)
GROWTH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(-0.36) (-0.34) (-0.29) (-0.26) (-0.30) (-0.28) (-0.22) (-0.19)
FIRM AGE 0.006 ** 0.004 0.008 * 0.006 0.005 * 0.003 0.007 0.004
(2.15) (1.53) (1.94) (1.40) (1.65) (0.90) (1.45) (0.80)
ADR 0.046 *** 0.051 *** 0.040 ** 0.046 *** 0.049 *** 0.053 *** 0.043 ** 0.048 ***
(4.14) (4.55) (2.32) (2.67) (3.96) (4.23) (2.22) (2.44)
SLS -0.002 -0.009 -0.002 -0.009
(-0.40) (-1.08) (-0.32) (-0.97)
SMS 0.029 0.046 0.048 ** 0.076 **
54
(1.50) (1.58) (2.26) (2.30)
TFS 0.000 *** 0.000 *** 0.000 *** 0.000 ***
(-3.68) (-3.18) (-2.94) (-2.45)
TSC 0.000 ** 0.000 * 0.000 *** -0.001 ***
(-2.12) (-1.71) (-3.60) (-3.01)
ECL 0.000 0.000 0.000 0.000
(-0.84) (-0.11) (-1.30) (-0.57)
CCL 0.000 0.000 0.000 0.000
(-1.20) (-0.50) (-0.90) (-0.29)
STOCK DIV 0.000 0.000 0.000 0.000
(0.20) (0.40) (-0.59) (-0.17)
RELATE 0.052 *** 0.079 *** 0.065 *** 0.105 ***
(3.71) (3.66) (4.20) (4.33)
AUDIT -0.002 -0.005 ** -0.002 -0.004 *
-1.531 -2.147 -1.162 -1.700
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
55
Table 7 The impact of information disclosure on dividend payouts across different levels of competition
This table reports the interacting effect of information disclosure and product market competition on dividend payouts. All models are based on equation (2). The
definitions of the variables are shown in detail in Appendix D. T values are reported in parentheses. *, **, *** denote statistical significance at 10%, 5%, and 1%,
respectively.
Panel A: The interacting effect of information disclosure (IR) and product market competition on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.0388 *** -0.0205 0.0032 0.0551 *** -0.0284 0.0013 0.0391 *** -0.0112 0.0211 0.0549 *** -0.0148 0.0263
(4.52) (-0.92) (0.14) (4.17) (-0.83) (0.04) (4.10) (-0.46) (0.84) (3.69) (-0.39) (0.67)
IR*HHI(high) 0.0005 0.0004 0.0004 0.0003 0.0003 0.0003 0.0008 0.0008 0.0008 0.0009 0.0009 0.0008
(0.99) (0.95) (0.91) (0.45) (0.39) (0.36) (1.61) (1.56) (1.48) (1.17) (1.11) (1.03)
IR*HHI(medium) 0.0003 0.0003 0.0003 0.0010 0.0009 0.0010 0.0003 0.0003 0.0003 0.0008 0.0008 0.0008
(0.79) (0.69) (0.66) (1.48) (1.38) (1.48) (0.72) (0.60) (0.54) (1.13) (1.02) (1.08)
IR*HHI(low) 0.0014 *** 0.0014 *** 0.0014 *** 0.0023 *** 0.0023 *** 0.0024 *** 0.0017 *** 0.0017 *** 0.0017 *** 0.0027 *** 0.0027 *** 0.0028 ***
(2.63) (2.65) (2.66) (2.86) (2.88) (2.92) (2.88) (2.89) (2.93) (2.94) (2.96) (3.03)
HHI(medium) 0.0008 0.0011 0.0012 0.0014 0.0017 0.0019 0.0014 0.0017 0.0019 0.0027 0.0031 0.0034
(0.31) (0.40) (0.46) (0.34) (0.43) (0.47) (0.47) (0.57) (0.65) (0.60) (0.69) (0.75)
HHI(high) -0.0007 -0.0006 -0.0002 0.0027 0.0029 0.0036 -0.0020 -0.0018 -0.0012 0.0013 0.0014 0.0026
(-0.25) (-0.22) (-0.07) (0.61) (0.65) (0.81) (-0.60) (-0.57) (-0.37) (0.25) (0.28) (0.51)
SIZE -3.6509 -3.8726 6.3149 6.5428 -2.6504 -3.1845 8.5468 8.4093
(-0.64) (-0.68) (0.72) (0.74) (-0.42) (-0.50) (0.86) (0.85)
LEVERAGE -0.0107 *** -0.0107 *** -0.0130 *** -0.0130 *** -0.0125 *** -0.0127 *** -0.0146 *** -0.0147 ***
(-9.21) (-9.23) (-7.27) (-7.25) (-9.68) (-9.81) (-7.25) (-7.31)
PF 0.0054 *** 0.0058 *** 0.0080 ** 0.0085 *** 0.0066 *** 0.0073 *** 0.0104 *** 0.0111 ***
56
(2.37) (2.54) (2.27) (2.38) (2.60) (2.86) (2.60) (2.78)
GROWTH 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
(-0.37) (-0.36) (-0.30) (-0.27) (-0.31) (-0.30) (-0.24) (-0.21)
FIRM AGE 0.0060 ** 0.0043 0.0084 ** 0.0062 0.0051 * 0.0028 0.0070 0.0040
(2.17) (1.55) (1.98) (1.45) (1.66) (0.91) (1.47) (0.83)
ADR 0.0457 *** 0.0510 *** 0.0394 ** 0.0460 *** 0.0488 *** 0.0530 *** 0.0433 ** 0.0483 ***
(4.12) (4.54) (2.30) (2.66) (3.95) (4.24) (2.24) (2.47)
SLS -0.0027 -0.0097 -0.0025 -0.0098
(-0.49) (-1.16) (-0.42) (-1.04)
SMS 0.0273 0.0454 0.0462 ** 0.0750 **
(1.43) (1.54) (2.18) (2.27)
TFS -0.0002 *** -0.0002 *** -0.0002 *** -0.0002 ***
(-3.65) (-3.11) (-2.93) (-2.42)
TSC -0.0002 ** -0.0003 * -0.0005 *** -0.0006 ***
(-2.07) (-1.69) (-3.52) (-2.98)
ECL 0.0000 0.0000 0.0000 0.0000
(-0.86) (-0.17) (-1.32) (-0.61)
CCL -0.0001 -0.0001 -0.0001 0.0000
(-1.27) (-0.51) (-1.01) (-0.35)
STOCK DIV 0.0001 0.0004 -0.0004 -0.0002
(0.20) (0.42) (-0.59) (-0.16)
RELATE 0.0523 *** 0.0799 *** 0.0655 *** 0.1059 ***
(3.74) (3.71) (4.22) (4.36)
AUDIT -0.0019 -0.0046 ** -0.0013 -0.0038
(-1.22) (-1.96) (-0.79) (-1.45)
57
Year Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed
Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
58
Panel B: The interacting effect of standardized information disclosure (IRS) and product market competition on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.0435 *** -0.0156 0.0081 0.0628 *** -0.0198 0.0099 0.0449 *** -0.0055 0.0268 0.0640 *** -0.0054 0.0359
(5.19) (-0.70) (0.36) (4.87) (-0.58) (0.29) (4.82) (-0.22) (1.07) (4.40) (-0.14) (0.92)
IRS*HHI(high) 0.0006 0.0006 0.0005 0.0007 0.0006 0.0006 0.0009 0.0008 0.0008 0.0011 0.0011 0.0010
(1.03) (1.00) (0.93) (0.77) (0.74) (0.71) (1.39) (1.36) (1.23) (1.18) (1.14) (1.04)
IRS*HHI(medium) 0.0006 0.0005 0.0005 0.0013 * 0.0013 0.0013 * 0.0007 0.0006 0.0006 0.0014 0.0013 0.0013
(1.11) (1.03) (1.02) (1.72) (1.64) (1.72) (1.20) (1.11) (1.09) (1.56) (1.47) (1.53)
IRS*HHI(low) 0.0013 ** 0.0013 ** 0.0013 ** 0.0020 ** 0.0020 ** 0.0021 ** 0.0017 *** 0.0016 *** 0.0017 *** 0.0025 ** 0.0025 ** 0.0026 ***
(2.03) (2.02) (2.04) (2.10) (2.09) (2.13) (2.38) (2.37) (2.41) (2.29) (2.29) (2.36)
HHI(medium) -0.0030 *** -0.0030 *** -0.0029 *** -0.0035 * -0.0034 * -0.0031 * -0.0036 *** -0.0035 *** -0.0034 *** -0.0041 * -0.0040 * -0.0037 *
(-2.51) (-2.47) (-2.38) (-1.89) (-1.85) (-1.69) (-2.68) (-2.63) (-2.58) (-1.94) (-1.91) (-1.79)
HHI(high) -0.0041 *** -0.0041 *** -0.0038 *** -0.0044 * -0.0045 * -0.0039 -0.0051 *** -0.0051 *** -0.0046 *** -0.0051 * -0.0051 * -0.0044
(-2.64) (-2.66) (-2.43) (-1.87) (-1.89) (-1.64) (-2.94) (-2.97) (-2.71) (-1.89) (-1.92) (-1.64)
SIZE -3.7831 -3.9940 5.9916 6.2204 -2.7490 -3.2684 8.2979 8.1679
(-0.66) (-0.70) (0.68) (0.71) (-0.43) (-0.52) (0.84) (0.82)
LEVERAGE -0.0107 *** -0.0107 *** -0.0130 *** -0.0129 *** -0.0125 *** -0.0126 *** -0.0146 *** -0.0147 ***
(-9.20) (-9.22) (-7.25) (-7.23) (-9.67) (-9.80) (-7.23) (-7.29)
PF 0.0055 *** 0.0059 *** 0.0082 ** 0.0087 *** 0.0067 *** 0.0074 *** 0.0105 *** 0.0113 ***
(2.40) (2.57) (2.31) (2.44) (2.61) (2.88) (2.63) (2.81)
GROWTH 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
(-0.37) (-0.36) (-0.30) (-0.27) (-0.32) (-0.30) (-0.24) (-0.21)
FIRM AGE 0.0059 ** 0.0043 0.0083 ** 0.0061 0.0051 * 0.0028 0.0070 0.0040
59
(2.16) (1.55) (1.96) (1.43) (1.66) (0.91) (1.47) (0.83)
ADR 0.0454 *** 0.0506 *** 0.0390 ** 0.0456 *** 0.0483 *** 0.0524 *** 0.0425 ** 0.0475 ***
(4.08) (4.50) (2.28) (2.63) (3.91) (4.19) (2.20) (2.43)
SLS -0.0026 -0.0095 -0.0024 -0.0096
(-0.47) (-1.13) (-0.40) (-1.02)
SMS 0.0270 0.0447 0.0459 ** 0.0744 **
(1.42) (1.52) (2.17) (2.25)
TFS -0.0002 *** -0.0002 *** -0.0002 *** -0.0002 ***
(-3.66) (-3.14) (-2.92) (-2.43)
TSC -0.0002 ** -0.0003 * -0.0005 *** -0.0006 ***
(-2.09) (-1.71) (-3.55) (-3.00)
ECL 0.0000 0.0000 0.0000 0.0000
(-0.82) (-0.11) (-1.29) (-0.57)
CCL -0.0001 -0.0001 -0.0001 0.0000
(-1.27) (-0.53) (-0.99) (-0.34)
STOCK DIV 0.0001 0.0003 -0.0004 -0.0002
(0.18) (0.38) (-0.61) (-0.19)
RELATE 0.0520 *** 0.0792 *** 0.0653 *** 0.1054 ***
(3.72) (3.67) (4.20) (4.34)
AUDIT -0.0020 -0.0047 ** -0.0015 -0.0040
(-1.29) (-1.99) (-0.89) (-1.51)
Year Fixed Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.66 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.59 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
60
Panel C: The interacting effect of information disclosure (IR) and alternative proxy of product market competition on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.0396 *** -0.0191 0.0048 0.0584 *** -0.0243 0.0058 0.0406 *** -0.0097 0.0229 0.0597 *** -0.0102 0.0314
(4.65) (-0.86) (0.21) (4.45) (-0.71) (0.17) (4.28) (-0.40) (0.91) (4.03) (-0.27) (0.80)
IR*CR4(high) 0.0003 0.0003 0.0003 0.0002 0.0001 0.0002 0.0004 0.0003 0.0003 0.0002 0.0001 0.0001
(0.69) (0.58) (0.61) (0.29) (0.19) (0.26) (0.64) (0.52) (0.51) (0.24) (0.14) (0.16)
IR*CR4(medium) 0.0003 0.0003 0.0003 0.0011 0.0011 0.0012 * 0.0003 0.0004 0.0003 0.0011 0.0011 0.0011
(0.69) (0.78) (0.74) (1.61) (1.64) (1.70) (0.66) (0.74) (0.65) (1.45) (1.46) (1.48)
IR*CR4(low) 0.0012 *** 0.0012 *** 0.0012 *** 0.0019 *** 0.0018 *** 0.0018 *** 0.0017 *** 0.0017 *** 0.0017 *** 0.0025 *** 0.0025 *** 0.0025 ***
(2.50) (2.41) (2.39) (2.52) (2.47) (2.48) (3.20) (3.12) (3.13) (3.00) (2.95) (2.98)
CR4(medium) -0.0012 -0.0013 -0.0011 -0.0031 -0.0031 -0.0031 -0.0016 -0.0017 -0.0014 -0.0041 -0.0041 -0.0038
(-0.56) (-0.60) (-0.54) (-0.95) (-0.95) (-0.93) (-0.68) (-0.72) (-0.60) (-1.12) (-1.12) (-1.04)
CR4(high) -0.0022 -0.0021 -0.0019 -0.0017 -0.0016 -0.0013 -0.0032 -0.0031 -0.0026 -0.0031 -0.0030 -0.0022
(-0.81) (-0.78) (-0.69) (-0.42) (-0.39) (-0.32) (-1.07) (-1.04) (-0.85) (-0.66) (-0.63) (-0.48)
SIZE -2.5602 -2.8428 7.4850 7.5632 -0.8255 -1.4422 10.8525 10.5234
(-0.45) (-0.50) (0.85) (0.86) (-0.13) (-0.23) (1.10) (1.06)
LEVERAGE -0.0105 *** -0.0106 *** -0.0128 *** -0.0129 *** -0.0122 *** -0.0125 *** -0.0143 *** -0.0145 ***
(-9.08) (-9.14) (-7.17) (-7.19) (-9.51) (-9.69) (-7.11) (-7.22)
PF 0.0052 ** 0.0058 *** 0.0078 ** 0.0085 *** 0.0063 *** 0.0072 *** 0.0100 *** 0.0110 ***
(2.29) (2.52) (2.22) (2.39) (2.47) (2.82) (2.51) (2.76)
GROWTH 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
(-0.36) (-0.35) (-0.29) (-0.26) (-0.31) (-0.29) (-0.23) (-0.20)
FIRM AGE 0.0059 ** 0.0042 0.0083 ** 0.0061 0.0051 * 0.0028 0.0071 0.0040
61
(2.16) (1.53) (1.97) (1.43) (1.67) (0.90) (1.48) (0.83)
ADR 0.0424 *** 0.0477 *** 0.0337 * 0.0405 ** 0.0436 *** 0.0477 *** 0.0346 * 0.0397 **
(3.79) (4.22) (1.95) (2.32) (3.50) (3.80) (1.78) (2.02)
SLS -0.0033 -0.0106 -0.0037 -0.0115
(-0.61) (-1.27) (-0.60) (-1.22)
SMS 0.0223 0.0387 0.0383 * 0.0636 *
(1.17) (1.31) (1.81) (1.92)
TFS -0.0002 *** -0.0002 *** -0.0002 *** -0.0002 ***
(-3.80) (-3.26) (-3.11) (-2.58)
TSC -0.0002 ** -0.0003 -0.0004 *** -0.0006 ***
(-1.97) (-1.57) (-3.39) (-2.82)
ECL 0.0000 0.0000 0.0000 0.0000
(-0.61) (0.05) (-1.00) (-0.33)
CCL -0.0001 -0.0001 -0.0001 -0.0001
(-1.35) (-0.62) (-1.12) (-0.47)
STOCK DIV -0.0002 0.0000 -0.0008 -0.0007
(-0.27) (0.01) (-1.23) (-0.73)
RELATE 0.0500 *** 0.0765 *** 0.0622 *** 0.1011 ***
(3.57) (3.55) (4.01) (4.17)
AUDIT -0.0019 -0.0046 * -0.0013 -0.0037
(-1.27) (-1.96) (-0.79) (-1.41)
Year Fixed Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.67 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.60 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
62
Panel D: The interacting effect of standardized information disclosure (IRS) and alternative proxy of product market competition on dividend payouts
DIV1 DIV2 TPAY1 TPAY2
Explanatory
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
constant 0.0435 *** -0.0152 0.0087 0.0642 *** -0.0179 0.0121 0.0462 *** -0.0043 0.0283 0.0677 *** -0.0020 0.0396
(5.18) (-0.69) (0.39) (4.97) (-0.52) (0.35) (4.95) (-0.18) (1.13) (4.65) (-0.05) (1.01)
IRS*CR4(high) 0.0005 0.0004 0.0004 0.0006 0.0005 0.0005 0.0003 0.0003 0.0002 0.0003 0.0002 0.0002
(0.82) (0.73) (0.72) (0.65) (0.56) (0.59) (0.53) (0.43) (0.36) (0.32) (0.23) (0.20)
IRS*CR4(medium) 0.0005 0.0005 0.0005 0.0015 * 0.0015 * 0.0016 ** 0.0006 0.0007 0.0006 0.0016 * 0.0017 * 0.0017 *
(0.90) (1.02) (1.00) (1.83) (1.89) (1.97) (1.04) (1.15) (1.08) (1.82) (1.86) (1.90)
IRS*CR4(low) 0.0011 ** 0.0010 * 0.0010 * 0.0015 * 0.0014 * 0.0014 * 0.0017 *** 0.0016 *** 0.0017 *** 0.0023 *** 0.0022 *** 0.0023 ***
(1.96) (1.84) (1.84) (1.76) (1.70) (1.70) (2.80) (2.68) (2.73) (2.40) (2.34) (2.40)
CR4(medium) -0.0043 *** -0.0040 *** -0.0039 *** -0.0055 *** -0.0052 *** -0.0050 *** -0.0064 *** -0.0061 *** -0.0060 *** -0.0086 *** -0.0084 *** -0.0081 ***
(-5.06) (-4.81) (-4.65) (-4.22) (-4.06) (-3.86) (-6.80) (-6.56) (-6.40) (-5.90) (-5.75) (-5.53)
CR4(high) -0.0051 *** -0.0051 *** -0.0048 *** -0.0073 *** -0.0073 *** -0.0068 *** -0.0079 *** -0.0079 *** -0.0074 *** -0.0109 *** -0.0109 *** -0.0102 ***
(-3.05) (-3.03) (-2.83) (-2.81) (-2.81) (-2.63) (-4.22) (-4.21) (-3.94) (-3.74) (-3.75) (-3.51)
SIZE -2.7239 -2.9972 7.1055 7.2064 -0.9800 -1.5771 10.4876 10.1941
(-0.48) (-0.53) (0.81) (0.82) (-0.15) (-0.25) (1.06) (1.03)
LEVERAGE -0.0105 *** -0.0106 *** -0.0128 *** -0.0129 *** -0.0122 *** -0.0125 *** -0.0143 *** -0.0145 ***
(-9.08) (-9.14) (-7.17) (-7.19) (-9.51) (-9.69) (-7.11) (-7.22)
PF 0.0053 ** 0.0059 *** 0.0080 ** 0.0087 *** 0.0064 *** 0.0074 *** 0.0102 *** 0.0113 ***
(2.33) (2.56) (2.27) (2.44) (2.53) (2.89) (2.57) (2.83)
GROWTH 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
(-0.36) (-0.35) (-0.29) (-0.26) (-0.31) (-0.29) (-0.23) (-0.20)
FIRM AGE 0.0059 ** 0.0042 0.0083 * 0.0060 0.0051 * 0.0028 0.0070 0.0039
63
(2.15) (1.52) (1.95) (1.41) (1.67) (0.90) (1.47) (0.82)
ADR 0.0426 *** 0.0479 *** 0.0344 ** 0.0411 *** 0.0435 *** 0.0475 *** 0.0348 * 0.0398 **
(3.81) (4.23) (1.99) (2.35) (3.49) (3.78) (1.79) (2.02)
SLS -0.0032 -0.0105 -0.0036 -0.0114
(-0.59) (-1.25) (-0.60) (-1.21)
SMS 0.0219 0.0377 0.0379 * 0.0626 *
(1.15) (1.28) (1.79) (1.89)
TFS -0.0002 *** -0.0002 *** -0.0002 *** -0.0002 ***
(-3.80) (-3.28) (-3.10) (-2.58)
TSC -0.0002 ** -0.0003 -0.0004 *** -0.0006 ***
(-1.97) (-1.57) (-3.40) (-2.83)
ECL 0.0000 0.0000 0.0000 0.0000
(-0.60) (0.09) (-0.98) (-0.29)
CCL -0.0001 -0.0001 -0.0001 -0.0001
(-1.35) (-0.63) (-1.12) (-0.48)
STOCK DIV -0.0002 0.0000 -0.0008 -0.0008
(-0.29) (-0.01) (-1.27) (-0.76)
RELATE 0.0498 *** 0.0763 *** 0.0621 *** 0.1009 ***
(3.57) (3.54) (4.00) (4.16)
AUDIT -0.0020 -0.0048 ** -0.0014 -0.0039
(-1.32) (-2.03) (-0.85) (-1.49)
Year Fixed Effects YES YES YES YES YES YES YES YES YES YES YES YES
Firm Fixed Effects YES YES YES YES YES YES YES YES YES YES YES YES
Adj. R2 0.67 0.67 0.67 0.63 0.63 0.63 0.64 0.64 0.64 0.60 0.60 0.60
Observation 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940 11,940
64
Appendix A Measurements of information rating based on five different dimensions
This appendix categorizes the 114 items used to evaluate a firm’s information rating in each
of the five dimensions of information disclosure. Total items are the number of items in each
dimension. Percentage of total items represented is the number of total items in each
dimension divided by total items in the sample (114). Items with extra rewards are those
items encouraged by the government regulator.
Dimension
Item range
Total items
Percentage of total items represented
Items with extra
rewards
(1) Regulatory compliance 1-12 12 11% None
(2) Timeliness of information
disclosure
13-38 26 23% 9 items
(3) Disclosure of financial forecast 39-43 5 4% 5 items
(4) Disclosure of annual report 44-93 50 44% 4 items
(5) Disclosure of firm website 94-114 21 18% 21 items
Total 100% 39 items
Data sources: SFI database
65
Appendix B Information disclosure and transparency measures
This appendix lists the 114 questions used to compile the transparency scores for each sample
firm. The questions fall into five categories of information disclosures: compliance with the
mandatory information disclosures, timeliness of information disclosure, disclosure of
financial forecast, disclosure of annual reports, and corporate website disclosure. Each
sample firm is assigned a rating from A++ to C- based on these questions.
I. Compliance with the Mandatory Information Disclosures (Questions 1-12)
1 Whether companies comply with Procedures for Verification and Disclosure of
Material Information of Listed Companies, and whether companies have no records
of breach penalty or other more serious punishment due to violation of the above
regulations?
2 Whether companies comply with Procedures for Holding Material Information Press
Conference of Listed Companies, and whether companies have no records of breach
penalty or other more serious punishment due to violation of the above regulations?
3 Whether companies comply with Procedures for Information Reporting of Listed
Companies, and whether companies have no records of breach penalty or other more
serious punishment due to violation of the above regulations?
4 Whether the announcement of ownership change of directors, supervisors, managers,
and shareholders with more than 10% ownership complies with TWSE / GTSM’s
regulations and whether companies have no records of punishment due to violation
of the above regulations?
5 Whether company’s announcements of lending and guarantee from the company
itself and its subsidiaries have no records of punishment due to violation of
regulators’ rules?
6 Whether company’s announcements of asset disposal or acquisition have no records
of punishment due to violation of regulators’ rules?
7 Whether company announces major events that have significant impact on
shareholders’ rights or stock price on a timely basis, and whether company has no
records of punishment due to violation of the above regulations?
8 Whether company has reported, on a timely basis, the internal control statement (four
months within the completion of accounting year) and internal audit related
operations, and whether company has no records of punishment due to violation of
the above regulations?
9 Whether company discloses auditor’s fee based on regulation and whether company
has no records of punishment due to violation of the above regulations?
10 Whether company’s financial report needs adjustment or re-statement as required by
regulator, TWSE, or GTSM?
11 Whether company discloses clarification based on regulators’ rules when the
material information that has some impact on stock price is reported by the press
media or investors, and whether company receives no notification of improvement
in this matter?
12 Whether company reports and announces shareholder handbook and meeting
supplement in time, and whether company receives no penalty associated with the
66
violation of the above regulations?
II. Timeliness of Information Reporting (Questions 13-39)
13 Whether company announces monthly financial report in time?
14 Whether company announces consolidated monthly financial report in time? (This
item receives extra bonus point)
15 Whether company announces monthly operating income and before tax income
statement in time? (This item receives extra bonus point)
16 Whether the company announces monthly guarantees and lending information
backed up by the company itself and its subsidiaries in time?
17 Whether company announces operating income, operating income by products for
major subsidiaries, and intra-company sales and its sales percentage between the
company itself and its major subsidiaries on a timely basis?
18 Whether company announces monthly amount of derivative product trading for the
company itself and its subsidiaries in time?
19 Whether company reports the investment information in Mainland from the company
and its overseas subsidiaries based on the Operating Rules for Information Report of
Listed Companies?
20 Whether company reports independent directors’ and supervisors’ position,
experience, and education background and their part-time jobs as directors and
supervisors for other companies in time?
21 Whether company reports treasury stock related operations to regulators, TWSE, or
GTSM in time?
22 Whether company reports annual exercised and unexercised employee stock warrant
information in time based on the Rules for Information Reporting of Listed
Companies?
23 Whether company reports annual report in time?
24 Whether company finishes annual report within two months of accounting year-end?
(This item receives extra bonus point)
25 Whether company reports annual report within three months of accounting year-end?
(This item receives extra bonus point)
26 Whether company reports semi-annual report in time?
27 Whether company reports semi-annual report within one month of accounting half
year-end? (This item receives extra bonus point)
28 Whether company reports first quarter and third quarter financial reports in time?
29 Whether company reports consolidated financial statements in time?
30 Whether company reports annual report in time?
31 Whether company reports first quarter and third quarter consolidated financial
statements in time?
32 Whether company reports first quarter and third quarter consolidated financial
statements within one month of first quarter-end and third quarter-end respectively
in time? (This item receives extra bonus point)
33 Whether company reports accounting manager’s qualifications and on-the-job
professional training situation in time?
34 Whether company reports shareholder handbook and meeting supplement 30 days
before the start of shareholder meeting? (This item receives extra bonus point)
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35 Whether company reports English version shareholder handbook and meeting
supplement 30 days before the start of shareholder meeting? (This item receives extra
bonus point)
36 Whether company reports English version shareholder annual report and uploads it
to market observation post system (MOPS)? (This item receives extra bonus point)
37 Whether company discloses English version material information concurrently when
Chinese version material information is announced? (This item receives extra bonus
point)
38 Whether company reports the date of shareholders’ meeting in time based on pre-
announcement reporting mechanism of publicly listed firms?
39 Whether company reports financial statements in XBRL format in time? (This item
receives extra bonus point)
III. Disclosure of Financial Forecast (Questions 40-44)
40 Whether company discloses financial forecast information of the current year
voluntarily? (This item receives extra bonus point)
41 Whether company discloses consolidated financial forecast information of the
current year voluntarily? (This item receives extra bonus point)
42 Whether company explains the possible factors that may lead to a discrepancy
between financial forecast and actual financial results in advance (warning of
forward looking information)?
43 Whether company has received rectification from regulator, and records of flaw from
TWSE / GTSM due to the delayed update (correction) of financial forecast
information?
44 Whether company has received rectification from regulator, and records of flaw from
TWSE / GTSM due to unreasonable basic assumptions on the delayed update
(correction) of financial forecast information?
IV. Disclosure of Annual Report (Questions 45-94)
(1) Transparency in Financial and Operating Information
45 Whether company discloses important accounting policy in annual report?
46 Whether the accounting standards that the company adopts are the same as the
generally accepted accounting principles in Taiwan?
47 Whether the annual report discloses accounting adjustments due to the adoption of
different accounting principles (Taiwan Vs. IFRS / U.S. GAAP)? (This item receives
extra bonus point)
48 Whether company discloses the methods of fixed asset depreciation and depreciation
age limit?
49 Whether company discloses the rules and methods of asset and liability valuation?
(This item receives extra bonus point)
50 Whether company uses buying price or selling price to decide the fair value of non-
stock and non-warrants derivative products? (This item receives extra bonus point)
51 Whether company discloses analytical information that is conducted by different
departments in annual report?
52 Whether company discloses the name of certified audit firm and the unqualified
(modified unqualified) audit report in annual report?
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53 Whether company discloses the amount and types of other non-audit fees that are
paid to the same certified audit firm or its affiliated enterprises in annual report?
(This item receives extra bonus point)
54 Whether company discloses organizational and ownership structures in annual
report?
55 Whether company discloses the guarantee, lending, and other derivative trading
information of itself or its affiliated enterprises in annual report?
56 Whether company discloses trading information for related persons (including its
affiliation) in annual report?
57 Whether company discloses the review of company’s operation from the
management team in annual report?
58 Whether company discloses information about industry trend and macroeconomics
environment in annual report?
59 Whether company discloses long-term and short-term sales expansion project in
annual report?
60 Whether company discloses future R&D plan and its estimated expenses in annual
report?
61 Whether company discloses R&D investment plan and progress in annual report?
(This item receives extra bonus point)
62 Whether company discloses detailed information about the products and services
manufactured and provided by the company in annual report?
63 Whether company discloses the amount produced and sold and product mix in annual
report?
64 Whether company discloses industry-specific Key Performance Indicators (KPI) in
annual report? (This item receives extra bonus point)
65 Whether company discloses historical performance indicator (such as ROE, ROA,
etc.) in annual report?
66 Whether company discloses risk management policy in annual report?
67 Whether company discloses the organizational structure of risk management in
annual report? (This item receives extra bonus point)
68 Whether company discloses the adoption of hedge accounting and its associated
objective and methods in annual report?
69 Whether company discloses managers’ participation in corporate governance related
on-the-job training in annual report? (This item receives extra bonus point)
70 Whether company discloses the information of employees’ on-the-job training in
annual report?
71 Whether company discloses all kinds of employees’ welfare, retirement plan, and
their current practice in annual report?
72 Whether company discloses certificates (regulator certified) holding situation for the
personnel responsible for the transparency of finance information in annual report?
(This item receives extra bonus point)
73 Whether company discloses the ethic or moral rules for employees in annual report?
(This item receives extra bonus point)
74 Whether company discloses the Procedures for Internal Material Information
Processing in annual report? (This item receives extra bonus point)
69
75 Whether company discloses work environment and safety related protective
measures in annual report? (This item receives extra bonus point)
76 Whether company discloses corporate social responsibility in annual report?
(2) Board Meeting and Ownership Structure
77 Whether company discloses directors’ or supervisors’ names, education, experience,
ownership, and the date of becoming board members in annual report?
78 Whether company discloses the classification of titles of directors and supervisors
based on “independence” in annual report?
79 Whether company discloses the part-time positions that are held by directors and
supervisors in annual report?
80 Whether company discloses directors’ and supervisors’ remuneration in annual
report?
81 Whether company discloses the detailed breakdown of directors’ and supervisors’
remuneration except those items required for disclosure by regulators in annual
report? (This item receives extra bonus point)
82 Whether company discloses the compensation of CEO, and vice presidents, and top
management in annual report?
83 Whether company discloses the current situation (increase or decrease) of the stocks
being used as collaterals by directors, supervisors, managers, and large shareholders
in annual report?
84 Whether company discloses the board meeting attendance situation for directors and
supervisors, and the attendance situation of audit committee meeting for independent
directors in annual report?
85 Whether company discloses governing information regarding the operation of board
meeting and audit committee meeting separately in annual report?
86 Whether company discloses training for directors and supervisors in annual report?
87 Whether company discloses the discussion of corporate governance in annual report?
88 Whether company discloses the resignation and dismissal situation for personnel
related to corporate disclosure and financial report in annual report?
89 Whether company discloses the names and positions of top 10 employee stock
warrants recipients in annual report?
90 Whether company discloses the bonus amount, names and positions of top 10
employees who receive stock bonus in annual report? (This item receives extra bonus
point)
91 Whether company discloses managers’ names, stock ownership, education,
experience, current part-time positions in other companies, and the number of
employee stock warrants in annual report?
92 Whether company discloses the amount and percentage of stock ownership for top
10 shareholders in annual report?
93 Whether company discloses the information of related persons between top 10
shareholders in annual report?
94 Whether company discloses the review of execution situation (for the items decided
for execution in shareholder meeting) in annual report? (This item receives extra
bonus point)
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V. Company Website Disclosure (Questions 95-114)
95 Whether company has corporate website that discloses public information (including
detailed financial data) on website?
96 Whether company discloses shareholders annual report on corporate website?
97 Whether company discloses public information (including detailed financial data) in
English on website?
98 Whether company discloses shareholder meeting information in English on
corporate website?
99 Whether company discloses monthly operating profit / loss (financial holding
companies, banks, and bills finance companies disclose profit and loss for the
departments with continued operation) and accumulated operating profit / loss for
the current year on corporate website?
100 Whether company discloses the reports of monthly revenue and the monthly revenue
for the previous 24 months on corporate website?
101 Whether company discloses the compliance of TWSE’s rule regarding the
qualifications of appointing independent directors on corporate website?
102 Whether company discloses execution items of board meeting on corporate website?
103 Whether company discloses complete meeting minutes of board meeting on
corporate website?
104 Whether company discloses dividends and stock price information on corporate
website?
105 Whether company discloses material information on corporate website?
106 Whether company discloses articles of incorporation, and the operating procedures
for acquisition and disposal of assets, lending, guarantee, and derivative trading on
corporate website?
107 Whether company provides shareholders Q&A function on corporate website?
108 Whether company discloses information on whether the company holds a conference
for institutional investor and posts meeting related information on corporate website?
109 Whether company discloses the audio or video recording throughout the conference
of institutional investors on corporate website?
110 Whether shareholders are allowed to exert their voting rights in writing or via
electronic media and whether such voting methods and their execution situation are
posted on corporate website?
111 Whether company discloses the election regulation regarding the directors and
supervisors to be elected are nominated by a nominating committee?
112 Whether company discloses corporate organizational structure, managers’ positions,
power, and their responsibility on corporate website?
113 Whether company discloses the organization and operation of internal audit on
corporate website?
114 Whether company discloses corporate social responsibility on corporate website?
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Appendix C Information ratings and their corresponding scores from 2005 to 2014
This appendix shows the corresponding information rating score for each information rating
ranging from A++ to C-.
Information rating (IR) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
A++ 7 7 7 7
A+ 5 5 5 5 5 5 6 6 6 6
A 4 4 4 4 4 4 5 5 5 5
A- 4 4 4 4
B 3 3 3 3 3 3 3 3 3 3
C 2 2 2 2 2 2 2 2 2 2
C- 1 1 1 1 1 1 1 1 1 1
Data source: SFI database, Taiwan
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Appendix D Variable definitions
This appendix provides the definition of each dependent and independent variable used in
the empirical analysis.
Variables Variable definitions
Dependent Variables
DIV1 Cash dividends / Book value of assets (Grullon and
Michaely, 2006)
DIV2 Cash dividends / Book value of equity (Chae et al.,
2009)
TPAY1 (Cash dividends + stock repurchases) / Book value of
assets (Grullon and Michaely, 2006)
TPAY2 (Cash dividends + stock repurchases) / Book value of
equity (Chae et al., 2009)
Explanatory Variables
IR The score of information rating ranging from 1 (the
lowest) to 7 (the highest)
IRS The standardized information rating score defined as the
difference between IR and the average of IR, scaled by
the standard deviation of IR for firm i at time t
HHI The Herfindahl Hirschman index computed as the sum of
squared market shares
CR4 The sales of (big1+big2+big3+big4)/total sales of the
market in the same industry
Firm Characteristics
SIZE Natural log of sales (Hu and Kumar, 2004)
LEVERAGE Debt to equity ratio (Hu and Kumar, 2004; Chae et al.,
2009)
PF Return on equity (Chae et al., 2009; Adjaoud and Ben-
Amar, 2010)
GROWTH The growth of sales measured by sales this year minus
sales last year divided by sales last year
AGE The time from the year of the firm’s listing date (Hu and
Kumar, 2004; Grullon and Michaelyl, 2006)
73
ADR A dummy variable equals one if the firm is also listed on
US stock exchanges and zero otherwise (Adjaoud and
Ben-Amar, 2010; Petrasek 2012)
Agency-based Proxies
Ownership Structure
SLS (%) Percentage of total outstanding shares owned by largest
shareholder
SMS (%) Percentage of managers’ shareholding or group of
managers’ shareholding (Oswald and Jahera (1991))
TFS (%) Percentage of total shares outstanding of controlling
family members (La Porta et al. (1999))
Divergence between cash
flow rights and control
rights
TSC Times of seating to cash flow rights: seating rights
divided by cash flow rights
ECL (%) The percentage of Excess of Critical Control Level
defined as the percentage of Voting Rights minus the
percentage of Critical Control Level
CCL (%) The critical control level that quote from Cubbin and
Leech (1983)
STOCK DIV (%) The percentage increase of the pool of available equities
RELATE (%) The shareholding percentage from the relatives of the
directors, supervisors, and top management represents
AUDIT A dummy variable equals one when a firm has Audit
Committee and zero otherwise
