This Article investigates the determinants of dividend policy in firms with concentrated
ownership structure. A review of the empirical literature shows that dividend payout ratios are lower in firms with controlling shareholders.
We explain this finding as a consequence of the legal rules governing cash distributions, which leave the dividend decision in the hands of the firm insiders, and the lack of monitoring mechanisms for checking the power of controlling shareholders. The analysis of the empirical evidence on dividend policy points out to the existence of an unresolved agency conflict between controlling shareholders and outside investors. We conclude that controlling shareholders are currently using the dividend policy to expropriate minority shareholders.
By the end of the twentieth century, the then-dominant literature on “law and finance” assumed that concentrated ownership was a product of deficient legal systems that did not sufficiently protect outside investors. At the same time,...Read more
Historically, economic activities have been organized around certain ideologies. We investigate the impact of politicians’ ideology on corporate policies by exploring a unique setting of ideological change—China from Mao to Deng around the 1978...Read more
We are witnessing a quiet but quick transformation of corporate governance. The rise of digital technologies and social media are forcing companies to reconsider how they organize themselves and structure firm governance.
What is...Read more
Passively managed index funds now hold over 25% of U.S. mutual fund and ETF assets. The rise of index investing raises fundamental questions about monitoring and corporate governance. We examine the voice and exit mechanisms and find that...Read more