Zero dividend policy and corporate governance: integrative framework

Abstract

Purpose: This study develops an integrative theoretical framework explaining why firms deliberately adopt and sustain zero dividend policies. While dividend payout behaviour has been widely examined, limited attention has been given to firms that consistently refrain from distributing cash dividends. This paper addresses this gap by synthesising governance, strategic, and behavioural mechanisms underlying zero dividend decisions, with particular relevance to European listed companies

Design/methodology/approach: This conceptual study is based on an integrative literature review supported by bibliometric mapping. Publications indexed in Scopus and Web of Science were analysed to identify dominant research streams and thematic structures in dividend policy research. Insights from agency theory, signalling theory, corporate governance theory, and investor behaviour are combined to develop a multidimensional conceptual framework.

Findings: Zero dividend policy may function as a governance mechanism, a potential source of agency conflict, and a strategic market signal. Its implications depend on governance quality, ownership structure, and investor sophistication. Sustained non-payment of dividends should be interpreted as a deliberate managerial strategy influenced by institutional and market conditions, particularly within European corporate environments.

Limitations and further research: The review is limited to English language publications and selected high quality journals, which may exclude relevant contributions from other contexts. Future empirical studies should test the proposed framework across European institutional settings and examine managerial motivations using primary data

Practical implications:  The proposed framework provides guidance for investors, regulators and corporate decision makers in evaluating the governance implications and market interpretation of sustained zero dividend strategies.

Originality/value: The study conceptualises zero dividend policy as a strategic corporate governance phenomenon rather than merely a residual financial outcome and establishes a foundation for subsequent empirical investigation.

Keywords: Dividend policy; Zero dividend policy; Corporate governance; Agency theory; Signalling theory; European firms.

Type of paper: G35; G30; M41.