 Effect of institutional ownership on dividends: An agency-theory-based analysisKiyoung Chang, Eun Kang and Ying Li Journal of Business Research, 2016, vol. 69, issue 7, 2551-2559 Abstract: This study examines the effect of institutional ownership on dividend payouts through the lens of agency theory. We hypothesize that only institutions with certain traits are likely to monitor. Monitoring institutions will use dividend payouts as a tool to mitigate firms' agency problems, conditional on those firms' financial performance. We find that (1) there is a positive relation between lagged long-term institutional ownership with a large stake and the dividend payout ratio, (2) the positive relation is more salient in firms with high agency costs, and (3) the positive relation is more salient when external monitoring is weak. These findings support that (1) concentrated and long-term institutional investors play a monitoring role and (2) monitoring institutions use dividend payouts as a monitoring device. Our findings are robust to endogeneity tests, level and change models, alternative income-based dividend payout measures, alternative measures of long-term institutions, and sub-period analyses. Keywords: Institutional investor; Agency theory; Monitoring; Long-term; Dividends (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:69:y:2016:i:7:p:2551-2559 DOI: 10.1016/j.jbusres.2015.10.088 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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