Two Proxies for Shareholder Influence: A Case of Payout Policy

Abstract

Using the Banzhaf index as a proxy for voting power, this paper investigates the relative importance of the size of equity ownership and voting power of large shareholders in influencing corporate policy regarding cash dividends and share repurchase. Our empirical findings indicates that consideration of voting power in models may results in conclusions different from those that consider the size of equity ownership. Conclusions may also differ for large insider and outsider shareholders, if firms are either paying dividends or repurchasing shares, or doing both.

Keywords: Corporate finance, Dividend payout, Shareholder influence, Voting power

JEL Classification: G32, G35