Ownership Concentration, Agency Conflicts, and Dividend Policy in Japan

2006 ◽  
Author(s):  
Kimie Harada ◽  
Pascal Nguyen
Keyword(s):  
Dividend Policy ◽  
Ownership Concentration ◽  
Agency Conflicts

scholarly journals Does Ownership Concentration Affect Profitability and Dividend Policy? Evidence from Listed Banks in Jordan

2021 ◽  
Vol 18 ◽  
pp. 1019-1027
Author(s):  
Ahmad Dahiyat ◽  
Esra Al-Nsour
Keyword(s):  
Dividend Policy ◽  
Investment Decisions ◽  
Ownership Concentration ◽  
Agency Conflicts ◽  
Return On Equity ◽  
Controlling Shareholders ◽  
Large Shareholders ◽  
Simple Regression

This paper examines how the ownership concentration affects banks’ profitability and dividend policy in Jordan. All banks listed on the Amman Exchange were selected (16 banks) over the period 2010 to 2019. Ownership concentration was defined as the percentage of ownership that equals or exceeds 5%, while profitability was defined by return on equity; dividend policy was defined by the pay-out ratio. Simple regression was utilized to examine the effect; the result revealed that ownership concentration has a positive significant impact on profitability, which means that banks with higher ownership concentration have better profitability, this result justified by the view of the power that controlling shareholders can greatly use to require management to make decisions that improve the performance. The finding showed a negative significant impact on dividend policy, which indicates that the existence of large shareholders can reduce agency conflicts; and maximize the wealth of the company. It is recommended that related parties especially investors should take the concentration of ownership as an important factor to take their investment decisions, whether related to purchasing banks’ shares for various purposes, or expectations of potential dividends.

scholarly journals Ownership Structure and Dividend Policy of Listed Deposit Money Banks in Nigeria: A Tobit Regression Analysis

2016 ◽  
Vol 6 (1) ◽  
pp. 1 ◽  
Author(s):  
Idris Ibrahim ◽  
Hussaini Shuaibu
Keyword(s):  
Ownership Structure ◽  
Dividend Policy ◽  
Institutional Ownership ◽  
Free Cash Flow ◽  
Ownership Concentration ◽  
Managerial Ownership ◽  
Tobit Regression ◽  
Diverse Range ◽  
Dividend Payment ◽  
Ex Post

Free cash flow hypothesis posit that regular paying of dividend can reduce agency conflict and through this, the range of future probable misuse of resources by management reduces. Ownership structure has been identified to have relationship with dividend policy of a firm.  Though the relationship is different for different class of owners and at different level; it does not influence dividend policy uniformly. Although, the linkage between the two has been monitored by many researchers, yet empirical researches do not provide consensus as to the direction of the relationships. Thus, the paper investigates the likelihood impact of ownership structure on dividend policy in the context of agency relation while using managerial ownership, institutional ownership, ownership concentration and foreign ownershipon dividend policy in the listed Deposit Money Banks (DMBs)in Nigeria. The research designs are Correlational and ex-post facto using secondary data extracted from the sampled companies’ annual financial reports for the period 2010-2014. Maximum likelihood (panel data tobit regression) is adopted as a technique of analysis for the study, using a sample of ten (10) out of seventeen (17) listed DMBs in Nigeria that served as population. The result shows that managerial ownership and ownership concentration are likely to have significant negative impact on dividend policy of listed DMBsin Nigeria, while institutional ownership is found to have likely significant positive impact on dividend policy of listed DMBs in Nigeria. But foreign ownership is found not to have likely significant impact on dividend policyof listed DMBsin Nigeria. Based on the findings, it is recommended among others that policy makers (Security and Exchange Commission and Corporate Affairs Commission) to design future policies where dividend payment could be facilitated and the diverse range of shareholders to be satisfied most especially minority shareholders. And that a limit should be set for managers on the proportion of shares to be held as this can facilitate dividend payment.

scholarly journals Dividend policy and corporate governance in Saudi stock market: Outcome model or substitute model?

2015 ◽  
Vol 12 (2) ◽  
pp. 74-91 ◽  
Author(s):  
Amina Hamdouni
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Dividend Policy ◽  
Good Governance ◽  
Free Cash Flow ◽  
Ownership Concentration ◽  
Board Structure ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Debt Policy

Theories suggest that corporate governance mechanisms affect corporate dividend policies. This study extends and tests the implications of two extant static agency models making opposite predictions. The outcome model predicts an increase in dividends when the corporate governance mechanisms improve, because shareholders are better able to force managers to disgorge cash. In contrast, the substitute model suggests that an improvement in the corporate governance mechanisms reduces the role of dividends in controlling agency costs, leading to a decrease in dividends. This paper investigates the dividend policy for firms listed on Saudi Arabia Stock Exchange. This is a case study of Saudi Stock Market, where the determinants of dividend policy have received little attention. This study use a panel dataset of non-financial firms listed on Saudi Arabia Stock Exchange between the years of 2007 and 2010. Based on a panel of 366 firm year observations of 99 Saudi firms, we provide evidence in outcome model or substitute model with ownership structure, board structure and debt policy. Three Tobit models are specified: In the first, we construct a governance index based on eight criteria: seven criteria which capture various aspects of a firm’s structure, policies and practices that constitute good governance and a criterion that examines the company’s compliance with Shariah law in all its activities. Therefore, we estimate the effect of corporate governance on dividend policy in the first model. In the second, we investigate how dividends interact with corporate governance mechanisms in a panel of data. We explore the relation between dividends and ownership structure (ownership concentration and managerial ownership), board structure (board size, Board independence and Chairman-CEO duality) and debt policy. In the final, another test of the substitute and the outcome models is built on the Jensen (1986) free cash flow theory, which states that dividend policy can extract surplus cash from management control by reducing free cash flow. In this third model, we examine how corporate governance improvements affect the dividends’ sensitivity to free cash flows by focusing on the coefficients on the interactive variables of the ownership structure, board structure, debt policy and the free cash flow. For the three models, we divide sample in two subsamples and we compare the results obtained by using criteria of company’s compliance with Shariah law. For the effects of corporate governance (measured by corporate governance score) on dividend levels, we find that dividend policy is a substitute model for good governance for all Saudi Arabia firms. When we select only Shariah compliant firms, results indicate also that dividend policy is a substitute model for good governance but results are insignificant. When we select only Non-Shariah compliant firms, results indicate the same conclusion. We find that governance is associated with fewer dividends, supporting the substitute model and indicating the influence of good governance by forcing less cash to be returned to investors. For the effects of corporate governance mechanisms on dividend levels, we find that the only variable affect the dividend levels for Non-Shariah compliant firms is the separation in the functions of chairman and of CEO supporting the substitute model. For Shariah compliant firms, dividend policy is an outcome for the separation in the functions of chairman and of CEO, and ownership concentration. Governance through the separation in the functions of chairman and of CEO and ownership concentration influences firms by forcing more cash to be returned to investors. For the effects of the corporate governance improvements on dividends’ sensitivity to free cash flow, our results support the substitute hypothesis for Shariah compliant firms regardless the board independence, board meeting, managerial ownership and debt. Improvements in these corporate governance mechanisms reduce firms’ need to force out the free cash flow through dividends. For Non-Shariah compliant firms, our results support the outcome model for managerial ownership and ownership concentration

scholarly journals Dividends and institutional investors activism: Pressure resistant or pressure sensitive?

2008 ◽  
Vol 6 (1) ◽  
pp. 38-43 ◽  
Author(s):  
José María Diez-Esteban ◽  
Óscar López-de-Foronda
Keyword(s):  
Corporate Governance ◽  
Legal System ◽  
Institutional Investors ◽  
Dividend Policy ◽  
Civil Law ◽  
Insurance Companies ◽  
Agency Conflicts ◽  
Anglo Saxon ◽  
Investment Funds ◽  
Different Characteristics

This paper provides new international evidence on the relationship between dividend policy and institutional ownership by analysing a sample of US and UK and Irish firms characterised by an Anglo-Saxon tradition and a matching sample of other EU companies from Civil Law legal systems. We hypothesize that, due to the different characteristics of both the legal system and the nature of agency conflicts in firms from those countries, the type of institutional investors and their role in corporate governance is different and so the use of dividend policy to solve the conflict of corporate governance problem differs in each legal system. We find that while in firms from Anglo-Saxon tradition the relation between dividends and institutional investors, pension and investment funds, is possitive, in Civil Law countries the relation is negative where investors are banks or insurance companies with other private interest inside the firm. These results are consistent with our hypotheses and breed new insights into the role of dividend policy as a disciplining mechanism in firms from different legal system with an important presence of institutional investors

scholarly journals Descriptive model of influence of ownership concentration on the corporate capital management

2021 ◽  
Vol 5 (1) ◽  
pp. 46-55
Author(s):  
Oleksandra Laktionova ◽  
Olha Rudenok
Keyword(s):  
Capital Structure ◽  
Ownership Structure ◽  
Agency Costs ◽  
Ownership Concentration ◽  
Principal Agent ◽  
Compensatory Mechanism ◽  
Company Performance ◽  
Agency Conflicts ◽  
Corporate Capital ◽  
The Capital Structure

Introduction. Significantly important factors that define the company's efficiency are the structure of proprietorship and capital structure. Therefore, the item of the relationship between these factors is reflected in the works of scientists. The necessary issue is the pick of correlation between own and borrowed funds since the optimum structure of capital leads to magnification of the market value based on company performance results. The relevance of deciding on the capital structure determines the feasibility of determining the effect of concentrated ownership on capital structure. In an unstable political, social, legal, and economic environment, ownership concentration turns into a compensatory mechanism that fills numerous institutional gaps. Concentrated possession enables it possible to influence the capital structure through agency costs. Aim and tasks. The main purpose of the article is to determine the link between concentration level of ownership and capital structure, between ownership structure and leverage. This paper substantiates the problem of “principal-agent” to identify problematic issues to further develop recommendations to strengthen appropriate market incentives. Results. The paper shows that the problem of the “principal-agent” exists independently of the rate of ownership concentration in the corporation. Agency costs are one of the determining factors in the composition of a corporation’s capital. This paper has clearly shown approaches to identifying the nature of the effect of ownership structure on the capital structure. It has been established how this influence is carried out, taking into account the mismatch of various groups of owners' interests and the effect of their “entrenching”, as well as the consequences of monitoring and expropriation with a highly concentrated structure of ownership. Conclusions. The choice of the ratio of own and borrowed funds depends on the actual ownership structure. Assumptions are made, the increase in the corporation's leverage owing to an increase in the blockholders shares. There is a reciprocal interconnection between leverage and agency costs. Because changing leverage is an instrument that helps to overcome agency conflicts and not just only proves is the result of their presence. The selected special characteristics gave grounds to conclude that the adjustment of the ratio of a company's debt to the value of its equity also depends on the goal of management solutions, as well as the current facility and prospects of the corporation.

Ownership concentration and dividend policy in Japan

2011 ◽  
Vol 37 (4) ◽  
pp. 362-379 ◽  
Author(s):  
Kimie Harada ◽  
Pascal Nguyen
Keyword(s):  
Dividend Policy ◽  
Ownership Concentration

Effect of ownership concentration on capital structure: evidence from the MENA region

2015 ◽  
Vol 8 (1) ◽  
pp. 99-113 ◽  
Author(s):  
Omar Farooq
Keyword(s):  
Capital Structure ◽  
United Arab Emirates ◽  
Negative Relationship ◽  
Ownership Concentration ◽  
Agency Conflicts ◽  
Information Asymmetries ◽  
Mena Region ◽  
Content Type ◽  
Growth Firms ◽  
The Relationship

Purpose – This paper aims to document how does ownership concentration, a proxy for agency conflicts, affect capital structure of firms in emerging markets. Agency relationship between insiders and outsiders has the potential to influence corporate decision-making which, in turn, impacts firm characteristics such as leverage. Design/methodology/approach – This paper uses pooled regression analysis to document the effect of ownership concentration on capital structure in the Middle East and North Africa (MENA) region (Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait and Bahrain), during the period between 2005 and 2009. Findings – The authors show that ownership concentration negatively affects capital structure. The results also show that for a given level of ownership concentration, the proportion of debt in capital structure goes up as information asymmetries decrease. Finally, the results show that for a given ownership concentration, it is the growth firms with low information asymmetries that have a higher proportion of debt in capital structure. Research limitations/implications – The authors argue that information asymmetries associated with ownership concentration minimize the ability of firms to raise debt, thereby resulting in a negative relationship between ownership concentration and capital structure. Furthermore, reluctance on the part of controlling shareholders to accumulate excess leverage to minimize non-diversifiable risk also negatively influences capital structure. Originality/value – Most of the prior studies on the relationship between ownership concentration and capital structure have been conducted in relatively more developed markets. An important market that has failed to attract attention regarding this issue is the MENA. This paper is an attempt to fill this gap by documenting the relationship between the two in the MENA region.

Sign in / Sign up

Export Citation Format

Share Document