Cultural Dimensions, Risk Aversion and Corporate Dividend Policy

How does risk aversion affect corporate dividend payout? Finance theories have long suggested a relationship between risk aversion and dividends but there is little empirical evidence on the extent of this relationship. In this paper we construct measures of risk based on two cultural dimensions developed by Hofstede (1983, 1991). Using over ten years of data for firms in 14 countries, this study is the first to provide evidence that firms in countries with higher risk aversion exhibit both lower dividend ratios and lower propensity to pay dividends.