Burden the Hand: Regulatory Intensity and Payout Policy

ABSTRACT We investigate the impact of regulatory intensity on firms' payout policies. While regulations may increase budgetary pressure, leading to decreased payout, we document that regulatory burden increases total payout, especially in the form of dividends. The documented dividend payment increase is significant for firms with higher institutional ownership or those needing more managerial discipline, but not driven by low investment opportunities. Firms increasing dividend followed by regulations are associated with enhanced firm value. The results indicate that shareholders pressure firms to increase dividend payments to discipline managers who might take advantage of the heightened uncertainty that the regulatory burden induces.