The mediating role of dividend policy on the impact of capital structure and corporate governance mechanisms on firm value among publicly listed companies in the Philippines from 2013 to 2016 using structural equation model

• Main Author: Ramirez, Franklin S.
• Format: text
• Language: English
• Published: Animo Repository 2018
• Subjects: Corporate governance > Philippines; Dividends > Philippines; Business enterprises > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/5505
• Institution: De La Salle University

This research studied the mediating role of dividend policy on the impact of capital structure and corporate governance mechanisms on firm value. Specifically, this study has the following four main objectives as follows: investigate the effects of (1) capital structure (debt ratio and debt to equity ratio) on firm value and (2) corporate governance (board size, board independence, CEO Duality, CEO compensation, and institutional ownership) on firm value; to (3) examine the effect of dividend policy on firm value; and to (4) explore the role of dividend policy as a mediating variable on the impact of capital structure and corporate governance on firm value among publicly listed companies in the Philippines from 2013 to 2016. This study was conducted using panel data of non-financial firms listed on Philippine Stock Exchange for the year 2013 to 2016. Data were drawn from the firms financial statements and annual corporate governance report, which were extracted from the OSIRIS database, company website and PSE Edge. Partial Least Squares - Structural Equation Modeling (PLS-SEM) approach was applied to analyze the full model, using a three-stage analysis process with the statistical significant level of 0.05. The findings revealed that capital structure, board size and CEO duality has a negative significant effect on firm value whereas executive compensation has a positive significant effect on firm value. However, board independence and institutional ownership have a positive but not significant effect on firm value. The study also found out that the impact of capital structure and corporate governance mechanisms on firm value was not mediated by dividend policy. The implication of these findings is that in the real world, markets are imperfect and firms do follow specific payout policies to enhance their value. These market factors such as taxation, transaction and issuing costs, informational asymmetry between the various investors or between managers and shareholders, legal and institutional factors, and different degrees of rationalization or of psychological behaviors affects how dividend payment becomes a significant factor in increasing or decreasing firm value.