Corporate governance and dividend pay-out policy in UK listed SMEs: The effects of corporate board characteristics

Purpose: This paper examines the extent to which corporate board characteristics influence
the level of dividend pay-out ratio using a sample of UK small and medium-sized enterprises
(SMEs) from 2010 to 2013 listed on the Alternative Investment Market.
Design/methodology/approach: The data is analysed by employing multivariate regression
techniques, including estimating fixed effects, lagged effects and two-stage least squares
regressions.
Findings: The results show that board size, the frequency of board meetings, board gender
diversity and audit committee size have a significant relationship with the level of dividend
pay-out. Audit committee size and board size have a positive association with the level of
dividend pay-out, whilst the frequency of board meetings and board gender diversity has a
significant negative relationship with the level of dividend pay-out. By contrast, the findings
suggest that board independence and CEO role duality do not have any significant effect on
the level of dividend pay-out.
Originality/value: This is one of the first attempts at examining the relationship between
corporate governance and dividend policy in the UK’s Alternative Investment Market, with
the analysis distinctively informed by agency theoretical insights drawn from the outcome
and substitution hypotheses.