Dividend Policy with Controlling Shareholders

2015 ◽  
Vol 16 (1) ◽  
Author(s):  
Maribel Sáez ◽  
María Gutiérrez
Keyword(s):  
Empirical Evidence ◽  
Dividend Policy ◽  
Empirical Literature ◽  
Minority Shareholders ◽  
Dividend Payout ◽  
Controlling Shareholders ◽  
Legal Rules ◽  
Ownership Structures ◽  
Agency Conflict ◽  
Concentrated Ownership

AbstractThis Article investigates the determinants of dividend policy in firms with concentrated ownership structures. A review of the empirical literature shows that dividend payout ratios are lower in firms with controlling shareholders. We explain this finding as a consequence of the legal rules governing cash distributions, which leave the dividend decision in the hands of the firm insiders, and the lack of monitoring mechanisms for checking the power of controlling shareholders. The analysis of the empirical evidence on dividend policy points to the existence of an unresolved agency conflict between controlling shareholders and outside investors. We conclude that controlling shareholders are currently using the dividend policy to expropriate minority shareholders.

Corporate Governance in China: A Survey*

2020 ◽  
Vol 24 (4) ◽  
pp. 733-772 ◽  
Author(s):  
Fuxiu Jiang ◽  
Kenneth A Kim
Keyword(s):  
Corporate Governance ◽  
Agency Problems ◽  
Future Research ◽  
Minority Shareholders ◽  
Controlling Shareholder ◽  
Controlling Shareholders ◽  
Agency Conflict ◽  
Concentrated Ownership ◽  
The Usa ◽  
Corporate Social

Abstract This article surveys corporate governance in China, as described in a growing literature published in top journals. Unlike the classical vertical agency problems in Western countries, the dominant agency problem in China is the horizontal agency conflict between controlling and minority shareholders arising from concentrated ownership structure; thus one cannot automatically apply what is known about the USA to China. As these features are also prevalent in many other countries, insights from this survey can also be applied to countries far beyond China. We start by describing controlling shareholder and agency problems in China, and then discuss how law and institutions are particularly important for China, where controlling shareholders have great power. As state-owned enterprises have their own features, we separately discuss their corporate governance. We also briefly discuss corporate social responsibility in China. Finally, we provide an agenda for future research.

ANALISIS PENGARUH TATA KELOLA PERUSAHAAN YANG BAIK TERHADAP RASIO PEMBAYARAN DIVIDEN

2007 ◽  
Vol 3 (1) ◽  
pp. 1
Author(s):  
Eko Budi Santoso
Keyword(s):  
Corporate Governance ◽  
Investor Protection ◽  
Dividend Payout ◽  
Controlling Shareholders ◽  
Concentrated Ownership ◽  
Good Corporate Governance ◽  
Crucial Problem

Investor protection in highty concentrated ownership as in Indonesia is a crucial problem. Expropriation tends to be high in lower investor protection because controlling shareholders can implement policies that benefit themselves at the expense of outside investors. In a high expropriation, outside investors will choose dividends rather than retained earnings.This paper examines good corporate governance as a solution.for a good investor protection in Indonesia. Using a sample of 245 firms for observdion period of 2001-200j, the results slows that stronger investor ptotection related with lower dividend payout ratio.Kqtwords : Good Corporate Governance, Dividend Payout Ratio,Investor Protection, Concentrated Ownership.

Controlling Shareholders: Issues and Challenges for Shareholders’ Empowerment in Directors’ Remuneration in Corporate Malaysia

2014 ◽  
Vol 9 (1) ◽  
Author(s):  
Shanthy Rachagan ◽  
Aiman Nariman Mohd Sulaiman
Keyword(s):  
Emerging Economies ◽  
Ownership Structure ◽  
Self Regulation ◽  
Developed Countries ◽  
Interesting Case ◽  
Minority Shareholders ◽  
Controlling Shareholders ◽  
Legal Rules ◽  
Current Reform

AbstractCurrent reform concerning directors’ remuneration relies on improving legal rules and self-regulation to minimise expropriation of minority shareholders. These have prominently focussed on empowering shareholders. Nonetheless, it is unclear as to the extent these reform proposals are compatible within the concentrated shareholding structure. Some of the reforms taking place in developed countries are suited for dispersed shareholding structure and thus transplanting them to emerging economies with concentrated shareholders may be ineffective. Malaysia poses an interesting case study, especially to countries with similar ownership structure as the concentrated shareholding structure raises different agency problems. The issue of protection of minority shareholder rights and the prevention of abuse of the controlling power by paying excessive remuneration to the executives is therefore a subject of due consideration in Malaysia and countries with similar shareholding structures. This article recommends that Malaysia and other emerging countries look into encouraging limited shareholder empowerment in tandem with laws.

scholarly journals The effect of ownership structure on dividend policy: evidence from Turkey

2016 ◽  
Vol 16 (1) ◽  
pp. 135-161 ◽  
Author(s):  
Basil Al-Najjar ◽  
Erhan Kilincarslan
Keyword(s):  
Family Involvement ◽  
Financial Institutions ◽  
Ownership Structure ◽  
Dividend Policy ◽  
Dividend Yield ◽  
Minority Shareholders ◽  
Foreign Investors ◽  
Dividend Payout ◽  
Content Type ◽  
Listed Firms

Purpose This paper aims to investigate the impact of ownership structure on dividend policy of listed firms in Turkey. Particularly, it attempts to uncover the effects of family involvement (through ownership and board representation), non-family blockholders (foreign investors, domestic financial institutions and the state) and minority shareholders on dividend decisions in the post-2003 period as it witnesses the major economic and structural reforms. Design/methodology/approach The paper uses alternative dividend policy measures (the probability of paying dividends, dividend payout ratio and dividend yield) and uses appropriate regression techniques (logit and tobit models) to test the research hypotheses, by focusing on a recent large panel dataset of 264 Istanbul Stock Exchange-listed firms (non-financial and non-utility) over a 10-year period 2003-2012. Findings The empirical results show that foreign and state ownership are associated with a less likelihood of paying dividends, while other ownership variables (family involvement, domestic financial institutions and minority shareholders) are insignificant in affecting the probability of paying dividends. However, all the ownership variables have a significantly negative impact on dividend payout ratio and dividend yield. Hence, the paper presents consistent evidence that increasing ownership of foreign investors and the state in general reduces the need for paying dividends in the Turkish market. Research limitations/implications Because of the absence of empirical research on how ownership structure may affect dividend policy and the data unavailability for earlier periods in Turkey, the paper cannot make comparison between the pre-and post-2003 periods. Nevertheless, this paper can be a valuable benchmark for further research. Practical implications The paper reveals that cash dividends are not used as a monitoring mechanism by investors in Turkey and the expropriation argument through dividends for Turkish families is relatively weak. Accordingly, the findings of this paper may benefit policymakers, investors and fellow researchers, who seek useful guidance from relevant literature. Originality/value To the best of the authors’ knowledge, this paper is the first to examine the link between ownership structure and dividend policy in Turkey after the implementation of major reforms in 2003.

scholarly journals The moderating effect of shareholder features on dividend disbursement: evidence from Indonesia

2018 ◽  
Vol 15 (3) ◽  
pp. 343-350 ◽  
Author(s):  
Novi Swandari Budiarso ◽  
Winston Pontoh
Keyword(s):  
Empirical Evidence ◽  
Dividend Policy ◽  
Stock Exchange ◽  
State Ownership ◽  
Moderating Effect ◽  
Single Individual ◽  
Public Ownership ◽  
Listed Firms ◽  
Ownership Structures ◽  
Basic Features

The objective of this study is to give an empirical evidence of relationship between features of ownership structures and dividend disbursement in context of bird in the hand and catering theories. The study uses 241 listed firms as the sample, which were drawn from Indonesia Stock Exchange during the period from 2010 to 2015. Under condition that dividend policy is not moderated by ownership features, dividend policy for firms with multi-institutional, single institutional, and state are fit in context of bird in the hand theory and catering theory. Under condition that dividend policy is moderated by ownership features, this study finds that dividend policy for firms with state ownership is not fit both in context of bird in the hand theory and catering theory. Specifically, the study finds that firms with features of: (1) multi-institutional, single individual, and public; (2) multi-institutional, multi-individual, and public; and (3) single institutional, and public are fit with bird in the hand theory. Furthermore, this study finds that catering theory is not fit for firms with basic features of multi-institutional and state ownership, but it is fit for firms with features of single institutional, single individual, and public ownership.

scholarly journals Individual Investors’ Dividend Taxes and Corporate Payout Policies

2017 ◽  
Vol 52 (3) ◽  
pp. 963-990 ◽  
Author(s):  
Oliver Zhen Li ◽  
Hang Liu ◽  
Chenkai Ni ◽  
Kangtao Ye
Keyword(s):  
Tax Reform ◽  
Tax Law ◽  
Individual Investors ◽  
Tax Rates ◽  
Minority Shareholders ◽  
Dividend Payout ◽  
Controlling Shareholders ◽  
Trading Activities ◽  
Dividend Tax ◽  
Dividend Taxes

The 2012 Dividend Tax Reform in China ties individual investors’ dividend tax rates to the length of their shareholding period. We find that firms facing a reduction (increase) in their individual investors’ dividend tax rates are more (less) likely to increase dividend payout. Such an effect is concentrated in firms where incentives of controlling shareholders and minority shareholders are aligned. Furthermore, investors respond to this tax law change by reducing trading activities before the cum-dividend day and successfully lower their dividend tax penalty. Overall, our evidence enhances the notion that individual investors’ tax profiles shape firms’ payout policies.

Principal–principal agency conflicts, product market competition and corporate payout policy in China

2020 ◽  
Vol 14 (3) ◽  
pp. 265-279
Author(s):  
Amjad Iqbal ◽  
Xianzhi Zhang ◽  
Muhammad Zubair Tauni ◽  
Khalil Jebran
Keyword(s):  
Market Competition ◽  
Agency Problems ◽  
Payout Policy ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Firm Level ◽  
Content Type ◽  
Agency Conflict ◽  
Concentrated Ownership ◽  
Country Level

Purpose The purpose of this paper is to examine the interaction between competition and corporate payout policy and more specifically to answer the question that whether competition mitigates the principal–principal agency conflicts and influences firms to distribute dividends to shareholders in Chinese corporations. Design/methodology/approach This research models measures of competition with scaled measures of dividends and analyzes a sample of 16,730 firm-year observations from Chinese-listed manufacturing firms for the period spanning 2003 to 2016. Further, this research uses the Tobit model (a censored regression) to empirically test the proposed hypotheses. Findings This research finds that intense competition not only mitigates agency problems and forces firms to disgorge cash but also increases a firm’s likelihood to pay dividends and weakens the negative association between agency conflicts and dividends. Practical implications The results show an important policy implication for the industry. As the principal–principal agency conflict restrains the dividends, the regulatory authorities could encourage a competitive environment and a more diverse ownership structure to induce a higher dividend rate and protect the minority shareholders. In addition, this study also has implications for other emerging markets characterized by concentrated ownership and principal–principal agency problems. Originality/value This study adds to the literature related to the disciplinary role of competition and identifies competition as a significant determinant of corporate payout policy. Furthermore, this research extends earlier research on corporate payout decisions that besides firm-level corporate governance and country-level legal system, industry-level competition also influences corporate payout decisions, significantly.

scholarly journals Mutual funds, tunneling and firm performance: evidence from China

2019 ◽  
Vol 55 (1) ◽  
pp. 355-387 ◽  
Author(s):  
Amon Chizema ◽  
Wei Jiang ◽  
Jing-Ming Kuo ◽  
Xiaoqi Song
Keyword(s):  
Firm Performance ◽  
Mutual Funds ◽  
Mutual Fund ◽  
Minority Shareholders ◽  
Controlling Shareholders ◽  
Concentrated Ownership ◽  
Institutional Settings ◽  
Private Interests ◽  
High Level ◽  
Tunneling Behavior

Abstract In contrast to US companies, Chinese firms have concentrated ownership with the effect that the central agency problem emanates from controlling shareholders expropriating minority shareholders, a phenomenon referred to as ‘tunneling’. This study examines the monitoring effect of mutual funds on the tunneling behavior of controlling shareholders. Due to the distinctive institutional settings in China, including a high level of ownership concentration, underdeveloped legal system in the stock markets and weak governance mechanisms in the mutual fund industry, we find that an increase in mutual fund ownership effectively mitigates the tunneling behavior of controlling shareholders thus improving firm performance. Nonetheless, after the mutual fund ownership reaches a certain threshold, an increase in concentrated mutual fund ownership is associated with heavier tunneling and lower firm performance. This may suggest that concentrated mutual funds collude with controlling shareholders in order to preserve their private interests. Moreover, the above effects are found to be more pronounced for firms with heavier tunneling activities. Our finding of the non-monotonic monitoring role of mutual funds brings attention to the private interest theory for mutual funds, an aspect that has been largely ignored in previous studies on mutual funds.

scholarly journals DEBT POLICY AS CORPORATE GOVERNANCE MECHANISM IN CONCENTRATED OWNERSHIP

2009 ◽  
Vol 6 (2) ◽  
Author(s):  
Mutamimah .
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Empirical Examination ◽  
Agency Conflict ◽  
Concentrated Ownership ◽  
Corporate Governance Mechanism ◽  
Debt Policy ◽  
Market Indicator

This research aims to test the debt policy as a mechanism to reduce agency conflict among majority and minority shareholders. This test aims to answer the problems to what extend debt can be used as corporate governance mechanism in a sense of reducing agency conflict. This research is important since most of company ownership structure in Indonesia is categorized concentrated structure, where its make a conflict between majority and minority shareholders. The populations of the research are companies that go public in the Indonesian capital market until the year of 2003. These samples of this research consist of 40 companies that are selected based on nonprobability technique with purposive sampling method. They were divided into two groups, high concentrated ownership structure and low concentrated ownership structure. In processes testing the hypothesis, 2 indicators were used, i.e. market indicator and accounting indicator. Event study analysis was used for market indicator, whereas multiple regression analysis was used for accounting indicator. Based on empirical examination result, it is generally concluded that debt policy cannot be used as mechanism to reduce agency conflict among majority and minority shareholders, both at high and low concentrated ownership structure. This is because of average company debt are higher than average industry debt. Debt policy tend be used as a tool of expropriation to minority shareholders. The expropriation is higher at high concentrated ownership structure rather than at low concentrated ownership structure and the difference is significant.

scholarly journals Reasons for and implications of the presence of institutional investors in the ownership structure of Brazilian companies

2016 ◽  
Vol 13 (4) ◽  
pp. 598-608 ◽  
Author(s):  
Lélis Pedro de Andrade ◽  
Aureliano Angel Bressan ◽  
Robert Aldo Iquiapaza ◽  
Wesley Mendes-Da-Silva
Keyword(s):  
Agency Theory ◽  
Chief Executive Officer ◽  
Ownership Structure ◽  
Institutional Investors ◽  
Chief Executive ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Controlling Shareholders ◽  
Agency Conflict ◽  
Equity Funding

Using 3,057 observations from 2000 to 2012, we found the risk of expropriation of minority shareholders by controlling shareholders is positively associated with participation of institutional investors in equity funding. There is no evidence that these investors increase the likelihood of substituting the chief executive officer or increase the company’s value or its financial performance. However, the presence of institutional investors is associated with higher company debt. This study suggests that institutional investors assume a function not fully explained by agency theory, such as enabling greater access to debt markets, but accentuate the agency conflict between controlling and minority shareholders. The main results show that the presence of institutional investors mitigates agency conflicts between shareholders and creditors, but increases the risk of expropriation of minority shareholders.

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