Do country institutions, banking system soundness and ownership structure influence the relationship between reporting quality and dividend payouts? Insights from Asian emerging markets

Purpose The study aims to explore how financial reporting quality influences dividend payouts in Asian emerging markets, while considering the moderating roles of banking system soundness, ownership concentration, and institutional quality. Given the unique governance structures and financial constraints in these markets, the research seeks to determine whether strong institutions enhance the relationship between reporting quality and dividends, whether sound banking systems mitigate firms’ reliance on dividends, and whether concentrated ownership structures limit minority shareholder influence. By addressing these factors, the study contributes to corporate finance literature by clarifying the role of external and internal governance mechanisms in shaping dividend policies. Design/methodology/approach This study employs a left-censored Tobit regression model to investigate the relationship between financial reporting quality and dividend payouts in Asian emerging markets. The dataset comprises 36,641 firm-year observations from eight countries between 2000 and 2019. To address endogeneity concerns, instrumental variable (IV) methods, dynamic lagged regression models, and Granger causality tests are applied. The study further examines the moderating effects of banking system soundness, ownership concentration, and institutional quality on this relationship. Fixed effects for year, industry, and country are included, and multiple proxies for financial reporting quality and dividends ensure robustness. Findings The results confirm a positive association between financial reporting quality and dividend payouts, supporting the hypothesis that transparent reporting reduces agency conflicts. However, this relationship is moderated by institutional and financial factors. Stronger institutional frameworks amplify the positive effect of reporting quality, while robust banking systems reduce firms’ reliance on dividends as a governance mechanism. Furthermore, concentrated ownership structures weaken the impact of reporting quality, as controlling shareholders prioritize private benefits over dividend distributions. These findings highlight the critical role of country-specific factors in shaping corporate payout policies in emerging markets, offering insights for investors, regulators, and policymakers. Originality/value This study offers novel insights by examining the contingent role of financial reporting quality (FRQ) in shaping dividend payouts across diverse institutional and banking environments, particularly in emerging markets. It uniquely integrates banking system soundness and institutional quality as moderating factors, advancing understanding beyond traditional corporate governance frameworks. By employing robust instrumental variable approaches and extensive firm-level data, it addresses endogeneity concerns while highlighting how external governance mechanisms amplify the FRQ-dividend relationship. These findings provide valuable implications for policymakers aiming to strengthen corporate transparency and financial stability in developing economies.