Family firms’ dividend policies: Evidence from a Japanese tax reform

Akitada Kasahara and Masanori Orihara

Finance Research Letters, 2022, vol. 45, issue C

Abstract: We hypothesize that family firms’ dividend policies are in part determined by a consumption smoothing motive of family shareholders. Our paper tests this hypothesis using a Japanese dividend tax reform in 2011 which increased the dividend tax rate for only some groups of major family shareholders. In this quasi-experimental setting, we find that family firms with non-executive family shareholders, who were likely rentiers, counteracted the tax increase by increasing dividends. This behavior cannot be explained by standard theories of dividend policy, which predict a lower dividend payout, and highlights a unique governance problem in family firms.

Keywords: Family firm; Dividend policy; Corporate governance; Consumption smoothing (search for similar items in EconPapers)
JEL-codes: G34 G35 H25 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002683

DOI: 10.1016/j.frl.2021.102199

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