Majority support of shareholders, monitoring incentive, and dividend policy

Naoya Mori and Naoshi Ikeda

Journal of Corporate Finance, 2015, vol. 30, issue C, 1-10

Abstract: As an alternative version of the side-payment model, this paper presents a demonstration of how the necessity of winning majority support of shareholders influences the relation between a blockholder's monitoring incentive and a firm's dividend policy. When dividend-averse individuals collectively hold a majority stake in a dispersed ownership structure, a dividend-seeking blockholder might be compelled to propose lower dividends than the tax-optimum to dominate the zero-dividend proposal. Under such circumstances, the blockholder has an incentive to provide unprofitable monitoring activity as long as the private benefits of tax-saving are greater than the pecuniary loss from the monitoring activity.

Keywords: Ownership structure; Corporate governance; Tax preferences (search for similar items in EconPapers)
JEL-codes: G32 G34 G35 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:30:y:2015:i:c:p:1-10

DOI: 10.1016/j.jcorpfin.2014.10.015

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