Korea Capital Market Institute

This study examines major determinants of dividend policy decisions in Korea and seeks to provide financial regulators with policy implications. More specifically, this study looks at whether Korean corporations pay more or less dividends than adequate and assesses the economics of dividend policy in the context of Korean capital market.

This study finds that dividend payments and proportion of dividend-paying corporations have increased while dividend yields and propensity to pay dividends have decreased considerably since early 2000.

Results show that profitability, capital expenditures, business risk, ownership structure, taxation policy, dividend payment experience are main drivers of corporate dividend policy decision making in Korea.

Korean corporations have seen steady decreases in profitability since the early 2000s. Dividend paying corporations are more profitable than dividend non-paying corporations, implying that investors are likely to receive less dividend payments in the medium term.