The effect of board effectiveness on dividend policy in Turkey: control-ownership wedge as moderator

The objective of this study is to examine the effect of board effectiveness on dividend policy with respect to the influence of a wedge (divergence between control rights and cash flow rights) in Turkey. However, being a member of the EU organization, many rules and regulations such as companies' and capital markets' company governance values are considered to minimize the gap amongst Turkey and the EU. An analysis of the influence of these changes should be of interest to examine its influence board effectiveness on dividend policy, This study used the data of 170 firms listed on the Borsa Istanbul (BIST) over the period from 2016 to 2020. Using Driscoll-Kraay standard errors regression model, this study outcome is conclusive in validating that board effectiveness decrease Type II Agency Problems through engagement with high divided policy, which supports agency-dependency theory. This study provides new insights and develops the understanding of the influence of a wedge on the incentives and ability of clients to demand a higher dividend, particularly in a setting of emerging markets, weak institutional controls, and the lack of strong corporate governance code and accounting standards in the Turkish environment. Furthermore, this study combined agency theory and resource dependency theory to analyses board strategy behaviour in terms of the monitoring function in the context of Turkey. However, the wedge weakened the influence of board Effectiveness on dividend policy, which will be an unfavorable outcome for the minority shareholders. Thus, this study proposes that regulators, particularly the Capital Market Board of Turkey (CMBT). should increase law enforcement to enhance good corporate governance in Turkey to accommodate the unique features of wedge firms and provide a protected environment for investors particularly, the minority shareholders.