Expropriation of Minority Shareholders and Payout Policy

36 Pages Posted: 1 May 2012 Last revised: 18 Nov 2017

See all articles by Amedeo De Cesari

Amedeo De Cesari

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group

Date Written: May 1, 2012

Abstract

This paper studies the payout policy of Italian firms controlled by large majority shareholders (controlled firms). The paper reports that a firm’s share of dividends in total payout (dividends plus repurchases) is negatively related to the size of the cash flow stake of the firm’s controlling shareholder and positively associated with the wedge between the controlling shareholder’s control rights and cash flow rights. These findings are consistent with the substitute model of payout. One of the implications of this model is that controlled firms with weak corporate governance set-ups, in which controlling shareholders have strong incentives to expropriate minority shareholders, tend to prefer dividends over repurchases when disgorging cash.

Keywords: dividend, repurchase, controlling shareholder, minority shareholder

JEL Classification: G32, G35

Suggested Citation

De Cesari, Amedeo, Expropriation of Minority Shareholders and Payout Policy (May 1, 2012). British Accounting Review 44 (2012) 207-220, Available at SSRN: https://ssrn.com/abstract=2049282

Amedeo De Cesari (Contact Author)

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group ( email )

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