The Influence of Foreign Directors on Dividend Policy

The increasing globalization of corporate boards has intensified scholarly interest in understanding the role of foreign directors in shaping strategic financial decisions such as dividend policy. However, the empirical evidence on the influence of foreign directors on dividend distribution remains inconclusive, especially in emerging markets characterized by unique institutional, cultural, and regulatory contexts. This study investigates the effect of foreign directors on dividend policy among publicly listed firms, addressing a critical gap in corporate governance literature. The primary objective is to examine whether the presence of foreign directors enhances dividend payouts due to their global experience, stronger shareholder orientation, and preference for transparency. Using panel data derived from 143 firms listed on the Nigerian Exchange between 2014 and 2023, the study employs a random effects regression model. Key variables include the proportion of foreign directors on the board and control variables such as firm profitability, firm leverage, firm size, and regulatory environment. Findings reveal a significant positive relationship between foreign directorship and dividend payout ratio, suggesting that foreign directors contribute to stronger shareholder rights protection and signal confidence in firm performance. However, the magnitude of the effect varies depending on the regulatory environment and firm-specific characteristics. The study is limited by its geographic focus on Nigeria, which may constrain generalizability. Furthermore, qualitative attributes such as the nationality, experience, and independence of foreign directors were not deeply explored. Practically, the findings underscore the need for boards and policymakers to consider board diversity strategies that include foreign expertise to boost investor confidence and promote shareholder value. Socially, enhancing dividend policy through effective board composition can support economic growth by improving wealth distribution and stimulating investment. The study contributes original insights to corporate governance discourse in emerging economies by linking board internationalization to dividend strategy.