Agency Problems and Dividend Policies Around the World (original) (raw)
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Stockholder Conflicts and Dividend Payout
SSRN Electronic Journal, 2000
This paper examines how dividend policy influences conflicts of interest between majority and minority stockholders in a large sample of private firms with controlling blockholders. We find that a higher potential for stockholder conflicts is associated with higher payout. This tendency is stronger when the minority stockholder structure is diffuse and when the minority is not on the firm's board. Minority-friendly payout is also associated with higher subsequent minority investment in the firm. These findings are consistent with the notion that dividend policy is used to mitigate agency costs, particularly when this benefits the majority in the longer run.
Corporate Governance and Dividend Policy in the Presence of Controlling Shareholders
Journal of Risk and Financial Management, 2020
Based on agency theory, we focused on the influence of corporate governance in the dividend policy of large listed firms with headquarters in continental Europe countries. Previous research focused on the influence of corporate governance on the performance and risk of listed firms, but the influence of corporate governance on the dividend policy has rarely been addressed despite the importance of dividends for shareholders and the implications on the free cash-flow, whose application may be a source of conflicts between managers and shareholders. In this paper, we study the influence of a set of governance mechanisms on the dividend policy over 12 years (2002 to 2013). The results, based on a panel data analysis, support the importance of governance mechanisms toward the protection of shareholders' interests, and reveal that the decisions on whether to pay dividends and how much to pay are grounded on different antecedents.
Shareholder Conflicts and Dividends*
Review of Finance
We examine how dividend policy is used to mitigate potential conflicts of interest between majority and minority shareholders in private Norwegian firms. The average payout is 50% higher if the majority shareholder's equity stake is 55% (high conflict potential) rather than 95% (low conflict potential). Such minority-friendly payout is also associated with higher subsequent minority shareholder investment. These results suggest that controlling shareholders voluntarily use dividends to reduce agency conflicts and build trust, rather than opportunistically preferring private benefits to dividends. We show that our results are unlikely to arise from liquidity or signaling motives.
Dividend policy and corporate governance: a research note
Corporate Ownership and Control, 2008
This paper explores the relationship between a firm’s dividend payment and an external perception of whether the firm exercises good corporate governance. Consistent with an agency explanation of dividend payout, we find that firms with higher corporate governance scores do pay lower dividends. The reduced cost associated with not seeking external funds as often as firms with higher dividends can be listed as a benefit for firms seeking to be known as better corporate citizens.
Dividend, Minority Shareholders, Legal Protection, and Firm Value: Evidence from Singapore
SSRN Electronic Journal, 2014
Singapore is a common law origin first world country with high degree of security of property right that should inter alia imply protection of corporate investors as regards their cash flow rights. The present paper empirically demonstrates that the minority shareholders extract dividend from the firms as an outcome of legal protection in a manner that mitigates problem of expropriation by corporate insiders. The firms follow a stable dividend policy catering to the needs of the investors with a favourable valuation implication. Overall our study highlights that the dividend policy of Singapore firms appear to ensure protection of minority shareholders right and is consistent with the global ranking and perception about the country in respect of security of property right.
Concentrated Control, Agency Problems and Dividend Policy
This study directly examines the impact of two distinct ownership structures, dual class and single class closely-held, on dividend policy. In these two samples, controlling shareholders have equal opportunity to expropriate wealth from outside shareholders. The salient agency problems of concentrated ownership and control are examined in this paper: the extraction of private benefits and conflict of interest between minority and controlling majority shareholders. Three potential explanations (reputation, private benefits and family legacy) are proposed and tested for dividend policy for firms within a concentrated ownership and control setting. The empirical results, using both fixed effects and tobit estimation methods, show that dual class companies pay out less cash dividend and total distribution (cash dividend and share repurchases) compared to single class closely-held companies. The results indicate that in the U.S., cash dividends and total distribution decrease as the divergence of voting and cash flow rights widens. This is consistent with both the extraction of private benefits and the family legacy hypotheses. Using excess CEO compensation for controlling shareholder-executives, we provide evidence in support of the extraction of private benefits hypothesis.
Pacific-Basin Finance Journal, 2020
Previous studies of the relation between insider ownership and dividend policy have focused only on U.S. or European firms from a legal system perspective. We explore how the effects of the increase in insider ownership concentration on the dividend policy change in different legal, corporate governance, and cultural environments in Asian countries. The severity of agency problems between controlling insiders and outside investors in Asian countries provides a unique circumstance for exploring this issue. We find that insider ownership has an inverse U-shaped relation with dividend payouts in Asian countries and that the inversely U-shaped relation becomes stronger in common law, strong corporate governance, low long-term orientation, or low uncertainty avoidance countries.
the effect of ownership structure on dividend policy
This paper aims at investigating the effect of ownership structure on corporation dividend policy using 35 Jordanian corporations listed on the Amman Stock Exchange over the period 2005-2010. Two empirical models of dividend are used, namely,Full Adjustment Model and Partial adjustment Model, to examine the potential associations between ownership structures and dividend policy. Institutional ownership and managerial ownership were regressed against dividends. Full Adjustment Model was superior since it could explain 61.57% of the variation in dividend, compared to 20.65% for Partial Adjustment Model. The results suggests that institutional ownership provides incentives for controlling shareholders to use their influence for maximizing the value of firms by reducing the use of funds in low return projects, thus implying that more cash flows can be distributed as dividends. Moreover, managerial ownership has a negative coefficient in the Partial Adjustment Model, and the critical values are significant, whereas the Full Adjustment Model does not produce only the unexpected sign, but also it is significant.The unexpected sign for managerial ownership implies that Jordanianfirms do not use dividends as a mechanism to reduce the agency problem between managers and shareholders.
Controlling Shareholders’ Activism Quality and the Disciplinary Role of Dividend
Research Journal of Finance and Accounting, 2014
The aim of this paper is to investigate the disciplinary role of dividend in the Tunisian context. Based on the agency theory predictions, we consider the effect of two conflicting model of dividend: the outcome and the substitute model. Using a sample of 528 firm-years listed on the Tunisian Stock Exchange over the period 1998-2009, our results highlight the deficiency of the disciplinary role of dividend. Empirical evidence shows that dividend policy is the result of large shareholders preferences. We find a positive relationship between dividend payout ratios and the voting powers of financial institutions and the second largest shareholder. In contrast, the control stakes of family and the largest shareholder are negatively related to the payout ratios. We also find a positive association between the free cash flow, the return on assets, the business sector and dividend to earnings ratio. Finally, we document a negative relationship between the debt ratio and dividend payouts. Taken together, our results are consistent with the outcome model of dividend policy.