EFFECT OF MANAGERIAL ABILITY ON DIVIDEND POLICY IN BRAZILIAN PUBLICLY-HELD COMPANIES

Abstract

This study investigated the effect of managerial ability, defined as a manager’s capacity to efficiently utilize corporate resources to generate revenue, on dividend policy in Brazilian publicly-held companies from 2019 to 2023. The originality of the study lies in applying this analysis in the Brazilian context, an emerging market with distinct regulatory and economic characteristics. Managerial ability is measured through Data Envelopment Analysis and isolated via Tobit regression. Logistic regression is applied to assess its impact on firm’s propensity to distribute dividends. The findings indicate that managerial ability significantly increases the likelihood of dividend payments. A one-unit increase in managerial ability raises the odds of paying dividends by 5.25%. This result supports the Signaling Theory, as more able managers use dividends to signal confidence in future performance. Sectoral analysis reveals that companies in regulated industries are more likely to distribute dividends. Theoretically, the study expands the literature on managerial ability, validating their influence on specific strategic decisions in the Brazilian context. In a practical way, the results offer insights for policymakers, corporate managers and investors.