Managerial entrenchment hypothesis and dividend payout policy

Raheel Gohar and Ayesha Rashid

Afro-Asian Journal of Finance and Accounting, 2021, vol. 11, issue 2, 222-236

Abstract: The influence of managerial entrenchment on dividend payout policies is studied for the period 2006 to 2014. The results of the study indicate that the ratio of the sum of shares owned by the CEO, the Chairman and the directors (i.e., insider ownership) is negatively related to both the likelihood and the payment of dividends. Even when controlling for firm size and leverage, it is found that the ratio of shares owned by the block holder shows negative and significant results (for both the logit and the tobit regression). This study proves that either the block holders are part of the management or they have strong board representation, so they do not consider dividend payouts as a disciplining and monitoring mechanism. Investment opportunities and leverage have a negative and significant relationship with both the likelihood and the level of payouts.

Keywords: managerial entrenchment; dividend payout policy; logit and tobit regression; Pakistan. (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:11:y:2021:i:2:p:222-236

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