Mandatory dividends and economic policy uncertainty: A challenge for investment opportunities

Evidence on the effects of being subject to the Mandatory Dividend Rules (MDR) is limited, and even more so on investment opportunities under uncertainty. Based on 445 companies spread across 20 countries, we will analyze that under uncertainty conditions, companies subject to MDR will have their investment opportunities more diminished than firms without MDR. Using panels and statistical matching, we find evidence in line with the above, suggesting that being exposed to MDR does not favor investment opportunities and even less so in the presence of uncertainty. Our findings are relevant for policymakers.

Automated summary

Based on an analysis of 445 companies from 20 countries, this study finds that companies subject to the Mandatory Dividend Rules (MDR) have decreased investment opportunities compared to firms without MDR, especially under uncertain conditions. The evidence supports the notion that being exposed to MDR does not favor investment opportunities, particularly in the presence of uncertainty. These findings have important implications for policymakers.