Agency Issues in a Family Controlled Corporate Governance Structure The Case of Italy

Bhattacharyya Nalinaksha (), Julie Ann Elston () and Laura Rondi
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Bhattacharyya Nalinaksha: College of Business and Public Policy, University of Alaska

CERIS Working Paper from Institute for Economic Research on Firms and Growth - Moncalieri (TO)

Abstract: This study provides empirical evidence on the relationship between dividend payout ratios, executive compensation and agency costs in Italy. Corporate governance in Italy is distinguished by the fact that a large number of Italian firms are family controlled, which may theoretically reduce asymmetry of information and associated agency costs. Using a panel of listed manufacturing firms we find evidence that family control plays a significant role in resolving agency issues, i.e. that increases in family control of the firm lead to a higher dividend payout. Nevertheless, as we also find that managerial compensations are negatively related to dividend payout ratios, even in this family controlled environment, dividends do play their role in mitigating agency problems.

Keywords: Corporate Governance; Managerial Compensation; Dividends; Family Firms; Italy (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: 2011-06
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Persistent link: http://EconPapers.repec.org/RePEc:csc:cerisp:201106

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