Institutional Ownership and Dividend Payout in Emerging Markets: Evidence from India

Chacko Jacob and Jijo Lukose P.J.
Authors registered in the RePEc Author Service: Jijo Lukose PJ ()

Journal of Emerging Market Finance, 2018, vol. 17, issue 1_suppl, S54-S82

Abstract: We examine the relationship between institutional investor ownership and dividend payouts using a large sample of NSE-listed non-financial firms during the period 2001 to 2016. Consistent with the evidence from the US market, institutional investors, on average, have larger holdings in dividend-paying firms and are seen to prefer dividend payers over non-payers among larger firms. However, among smaller firms, institutional investors seem to prefer non-paying firms. Consistent with it, logistic regression results reveal that institutional investors do improve a firms’ propensity to pay dividends, primarily across large firms. Further, among dividend-paying firms, institutional investors, on average, are observed to have relatively lesser holdings in firms with higher payouts than those with lower payouts. In line with these observations, regression analysis also provides no evidence to support a positive relationship between total institutional ownership and payout level. However, across investor categories, we do find evidence for domestic institutional investors (DII) in improving payouts. Further, we use a dynamic panel GMM estimator to correct for endogeneity and find that the relationship is robust among large firms. Our results highlight the role of DII in improving dividend payout and provide support to models that predict a positive relationship. JEL Classification: G23, G32, G34, G35

Keywords: Institutional ownership; corporate governance; dividend policy (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:17:y:2018:i:1_suppl:p:s54-s82

DOI: 10.1177/0972652717751538

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