Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic

Jan Bena and Jan Hanousek

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: Using cross-sectional analysis of corporate dividend policy we show that large shareholders extract rents from firms and expropriate minority shareholders in the weak corporate governance environment of an emerging economy. By comparing dividends paid across varying corporate ownership structures— concentration, type, and domicile of ownership—we quantify these effects and reveal that they are substantial. We find that the target payout ratio for firms with majority ownership is low but that the presence of a significant minority shareholder increases the target payout ratio and hence precludes a majority owner from extracting rent. In contrast to other studies from developed markets, our unique dataset from the Czech Republic for the period 1996-2003 permits us to take account of the endogeneity of ownership.

Keywords: Rent extraction; Large shareholders; Corporate governance; Dividend policy. (search for similar items in EconPapers)
JEL-codes: D21 G32 G35 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-acc, nep-fin and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic (2008)
Working Paper: Rent extraction by large shareholders: evidence using dividend policy in the Czech Republic (2006)
Working Paper: Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp291

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