Do non-financial factors influence corporate dividend policies? Evidence from business strategy

Zhangfan Cao, Steven Xianglong Chen, Mostafa Harakeh, Edward Lee

Research output: Journal PublicationArticlepeer-review

5 Citations (Scopus)


In this paper, we examine the influence of business strategy on dividend policy. We find that firms following an innovation-oriented strategy (prospectors) pay significantly lower dividends than those following an efficiency-oriented strategy (defenders). Our cross-sectional analyses show that such association is more pronounced among firms with greater investment opportunities and superior performance. Further analysis reveals that prospectors make significantly more capital investment, consistent with prospectors paying fewer dividends to finance their investment activities. Moreover, we address potential endogeneity concerns by implementing (i) a triple-difference analysis (DiDiD) that exploits an exogenous shock that hinders innovation through curbing the supply of highly skilled employees and (ii) an instrumental variable approach. Our results are robust to a propensity-score-matched (PSM) analysis, the inclusion of individual business strategy components, and the use of alternative measures of the dependent variables. Overall, our findings highlight business strategy as an inherent and non-financial determinant of dividend policies.

Original languageEnglish
Article number102211
JournalInternational Review of Financial Analysis
Publication statusPublished - Jul 2022


  • Business strategy
  • Capital investment
  • Dividend payout
  • Talent mobility

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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