Economic policy uncertainty and dividends: New evidence on moderating effects from Japan

We document a positive association between economic policy uncertainty (EPU) and dividend payouts using data on 3,460 Japanese listed firms over 1991-2023. The effect is weaker for financially inflexible and bank-dependent firms, but stronger under governance-intensive ownership. The EPU-dividend relation also varies across crises: it was most attenuated during the 1997-1999 Japanese Banking Crisis, moderated during the COVID-19 pandemic, and unaffected during the 2007-2008 Global Financial Crisis. Robustness checks using alternative EPU proxies and addressing potential endogeneity yield consistent results. Overall, the findings highlight how ownership structure, financial flexibility, bank dependence, and crisis heterogeneity shape corporate payout policy under heightened policy uncertainty. • Higher EPU drives an increase in dividend payout. • The positive association between EPU and dividend payouts is less pronounced in firms with high bank dependency and those with lower financial flexibility. • The positive association between EPU and dividend payouts is more pronounced in firms with high governance-intensive ownership. • The EPU–dividend link is weakest during Japan’s banking crisis, underscoring the role of financial distress in reducing payout responses to uncertainty.