Abstract

This study investigates the relationship between corporate governance and dividend policy in Jordan using a sample of 47 industrial company listed in Amman Stock Exchange (ASE) during the period 2005-2011. The results show that large firms with high investment opportunity set (growth) and high return on equity make large dividend payment, but firms with high financial leverage degree make lesser dividend payment. The random regression was used to test the relationship between the corporate governance factors (corporate holdings, financial institution holdings, insiders holding and foreign holding) and dividend yield. The corporate holdings and financial institution holdings have a nonlinear relationship with dividend yield, as holding increase the dividend yield increase up to a certain level of holdings supporting the free cash flow theory. The relationship is positive in level and negative in square. As the insiders’ holding and foreign holdings increase the dividend yield decrease supporting the signaling theory.

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