Stockholder Conflicts and Dividends

Janis Berzins (), Øyvind Bøhren and Bogdan Stacescu

No 1202, Working Papers from Departament Empresa, Universitat Autònoma de Barcelona

Abstract: Conflicts of interest between majority and minority stockholders affect a large proportion of firms in any economy, but has received little attention in the empirical literature. We examine the link between the potential for such conflicts and the firm’s payout policy on a large sample of Norwegian private firms with controlling stockholders and detailed ownership data. Our evidence shows that the stronger the potential conflict between the stockholders, the higher the proportion of earnings paid out as dividends. This tendency to reduce stockholder conflicts by dividend payout is more pronounced when the minority is diffuse and when a family’s majority block is held by a single family member. We also find evidence that a minority-friendly payout policy is associated with higher future minority investment in the firm. These results are consistent with the notion that potential agency costs of ownership are mitigated by dividend policy when the majority stockholder benefits from not exploiting the minority.

Keywords: Corporate governance; Ownership; Minority stockholders; Dividends. (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2012-03, Revised 2012-03
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in Working Papers at the Department of Business, March pages 1-42

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Persistent link: https://EconPapers.repec.org/RePEc:bbe:wpaper:1202

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