IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v91y2001i1p54-78.html
   My bibliography  Save this article

Dividends and Expropriation

Author

Listed:
  • Larry H. P. Lang
  • Mara Faccio
  • Leslie Young

Abstract

Whereas most U.S. corporations are widely held, the predominant form of ownership in East Asia is control by a family, which often supplies a top manager. These features of "crony capitalism" are actually more pronounced in Western Europe. In both regions, the salient agency problem is expropriation of outside shareholders by controlling shareholders. Dividends provide evidence on this. Group-affiliated corporations in Europe pay higher dividends than in Asia, dampening insider expropriation. Dividend rates are higher in Europe, but lower in Asia, when there are multiple large shareholders, suggesting that they dampen expropriation in Europe, but exacerbate it in Asia.

Suggested Citation

  • Larry H. P. Lang & Mara Faccio & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March.
    • Handle: RePEc:aea:aecrev:v:91:y:2001:i:1:p:54-78
    Note: DOI: 10.1257/aer.91.1.54
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.91.1.54
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Brickley, James A., 1983. "Shareholder wealth, information signaling and the specially designated dividend : An empirical study," Journal of Financial Economics, Elsevier, vol. 12(2), pages 187-209, August.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    3. Michaely, Roni & Thaler, Richard H & Womack, Kent L, 1995. "Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?," Journal of Finance, American Finance Association, vol. 50(2), pages 573-608, June.
    4. Miller, Merton H & Rock, Kevin, 1985. "Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-1051, September.
    5. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-659, September.
    6. Fudenberg, Drew & Tirole, Jean, 1995. "A Theory of Income and Dividend Smoothing Based on Incumbency Rents," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 75-93, February.
    7. Armando Gomes, "undated". "Multiple Large Shareholders in Corporate Governance," Rodney L. White Center for Financial Research Working Papers 5-99, Wharton School Rodney L. White Center for Financial Research.
    8. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    9. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    10. Healy, Paul M. & Palepu, Krishna G., 1988. "Earnings information conveyed by dividend initiations and omissions," Journal of Financial Economics, Elsevier, vol. 21(2), pages 149-175, September.
    11. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
    12. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    13. Miller, Merton H. & Scholes, Myron S., 1978. "Dividends and taxes," Journal of Financial Economics, Elsevier, vol. 6(4), pages 333-364, December.
    14. Pettit, R Richardson, 1972. "Dividend Announcements, Security Performance, and Capital Market Efficiency," Journal of Finance, American Finance Association, vol. 27(5), pages 993-1007, December.
    15. Michael J. Barclay & Clifford W. Smith & Ross L. Watts, 1995. "The Determinants Of Corporate Leverage And Dividend Policies," Journal of Applied Corporate Finance, Morgan Stanley, vol. 7(4), pages 4-19, January.
    16. repec:bla:jfinan:v:44:y:1989:i:4:p:1039-47 is not listed on IDEAS
    17. Lee, Bong-Soo, 1995. "The Response of Stock Prices to Permanent and Temporary Shocks to Dividends," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(1), pages 1-22, March.
    18. Praveen Kumar, 1988. "Shareholder-Manager Conflict and the Information Content of Dividends," The Review of Financial Studies, Society for Financial Studies, vol. 1(2), pages 111-136.
    19. Masahiko Aoki, 2013. "Toward an Economic Model of the Japanese Firm," Chapters, in: Comparative Institutional Analysis, chapter 18, pages 315-341, Edward Elgar Publishing.
    20. John, Kose & Williams, Joseph, 1985. "Dividends, Dilution, and Taxes: A Signalling Equilibrium," Journal of Finance, American Finance Association, vol. 40(4), pages 1053-1070, September.
    21. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring.
    22. Aharony, Joseph & Swary, Itzhak, 1980. "Qtrly Dividend and Earnings Announcements and Stockholders' Returns: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 35(1), pages 1-12, March.
    23. Marco Becht & Ekkehart Boehmer, 2001. "Ownership and voting power in Germany," ULB Institutional Repository 2013/13334, ULB -- Universite Libre de Bruxelles.
    24. Prowse, Stephen D, 1992. "The Structure of Corporate Ownership in Japan," Journal of Finance, American Finance Association, vol. 47(3), pages 1121-1140, July.
    25. Lucian Bebchuk & Reinier Kraakman & George Triantis, 1999. "Stock Pyramids, Cross-Ownership, and the Dual Class Equity: The Creation and Agency Costs of Seperating Control from Cash Flow Rights," NBER Working Papers 6951, National Bureau of Economic Research, Inc.
    26. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
    27. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, April.
    28. Asquith, Paul & Mullins, David W, Jr, 1983. "The Impact of Initiating Dividend Payments on Shareholders' Wealth," The Journal of Business, University of Chicago Press, vol. 56(1), pages 77-96, January.
    29. Rafel Crespi-Cladera & Miguel A. Garcia-Cestona, 1999. "Ownership and Control: A Spanish Survey," Working Papers 1999.23, Fondazione Eni Enrico Mattei.
    30. Slovin, Myron B & Sushka, Marie E, 1997. "The Implications of Equity Issuance Decisions within a Parent-Subsidiary Governance Structure," Journal of Finance, American Finance Association, vol. 52(2), pages 841-857, June.
    31. Poterba, James M & Summers, Lawrence H, 1984. "New Evidence that Taxes Affect the Valuation of Dividends," Journal of Finance, American Finance Association, vol. 39(5), pages 1397-1415, December.
    32. Claessens, Stijn & Djankov, Simeon & Joseph P. H. Fan & Lang, Larry H. P., 1999. "Expropriation of minority shareholders : evidence from East Asia," Policy Research Working Paper Series 2088, The World Bank.
    33. repec:bla:jfinan:v:53:y:1998:i:2:p:635-672 is not listed on IDEAS
    34. Litzenberger, Robert H. & Ramaswamy, Krishna, 1979. "The effect of personal taxes and dividends on capital asset prices : Theory and empirical evidence," Journal of Financial Economics, Elsevier, vol. 7(2), pages 163-195, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
    2. Faccio, Mara & Lang, Larry H.P. & Leung, Joanne, 2000. "Dividends and Exploration," Working Paper Series 3917, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. repec:vuw:vuwscr:19016 is not listed on IDEAS
    4. Faccio, Mara & Lang, Larry H.P. & Leung, Joanne, 2000. "Dividends and Exploration," Working Paper Series 19016, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    5. Kartal Demirg ne, 2015. "Determinants of Target Dividend Payout Ratio: A Panel Autoregressive Distributed Lag Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 418-426.
    6. Carlos Martins, 2007. "Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data," Working Papers de Economia (Economics Working Papers) 40, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
    7. Goergen, Marc & Renneboog, Luc & Correia da Silva, Luis, 2005. "When do German firms change their dividends?," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 375-399, March.
    8. Roni Michaely & Stefano Rossi & Michael Weber & Michael Weber, 2017. "The Information Content of Dividends: Safer Profits, Not Higher Profits," CESifo Working Paper Series 6751, CESifo.
    9. H.Kent Baker & Gary E. Powell & E.Theodore Veit, 2002. "Revisiting the dividend puzzle," Review of Financial Economics, John Wiley & Sons, vol. 11(4), pages 241-261.
    10. Renneboog, L.D.R. & Trojanowski, G., 2005. "Patterns in Payout Policy and Payout Channel Choice of UK Firms in the 1990s," Discussion Paper 2005-002, Tilburg University, Tilburg Law and Economic Center.
    11. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2014. "Controlling shareholder, split-share structure reform and cash dividend payments in China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 339-357.
    12. Eva Liljeblom & Sabur Mollah & Patrik Rotter, 2015. "Do dividends signal future earnings in the Nordic stock markets?," Review of Quantitative Finance and Accounting, Springer, vol. 44(3), pages 493-511, April.
    13. James, Hui & Benson, Bradley W. & Wu, Chen (Ken), 2017. "Does CEO ownership affect payout policy? Evidence from using CEO scaled wealth-performance sensitivity," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 328-345.
    14. Randall Morck, 2003. "Why Some Double Taxation Might Make Sense: The Special Case of Inter-corporate Dividends," NBER Working Papers 9651, National Bureau of Economic Research, Inc.
    15. Blau, Benjamin M. & Fuller, Kathleen P., 2008. "Flexibility and dividends," Journal of Corporate Finance, Elsevier, vol. 14(2), pages 133-152, April.
    16. Paul McGuinness & Kevin Lam & João Vieito, 2015. "Gender and other major board characteristics in China: Explaining corporate dividend policy and governance," Asia Pacific Journal of Management, Springer, vol. 32(4), pages 989-1038, December.
    17. Fairchild, Richard & Guney, Yilmaz & Thanatawee, Yordying, 2014. "Corporate dividend policy in Thailand: Theory and evidence," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 129-151.
    18. Bartram, Söhnke M. & Brown, Philip & How, Janice C.Y. & Verhoeven, Peter, 2007. "Agency Conflicts and Corporate Payout Policies: A Global Study," MPRA Paper 23244, University Library of Munich, Germany.
    19. Dr. Jeetendra Dangol, 2016. "Nepalese Stock Market Efficiency in Respect of Cash and Stock Dividend Announcement," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 7(3), pages 60-71, September.
    20. Darakhshan Younis & Attiya Yasmin Javid, 2014. "Market Imperfections and Dividend Policy Decisions of Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:99, Pakistan Institute of Development Economics.
    21. Jianan Guo, 2016. "Ultimate Controlling Shareholders and Dividend Payout Policy in Chinese Stock Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-35, June.

    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:91:y:2001:i:1:p:54-78. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.