IDEAS home Printed from https://ideas.repec.org/a/ris/ambsrv/0081.html
   My bibliography  Save this article

Does Promoter Ownership Affect Dividend Policy? An Agency Problem Perspective

Author

Listed:
  • Singh, Geeta

    (IBS Hyderabad (ICFAI Foundation for Higher Education), Telangana, India)

  • Kumar, Satish

    (IBS Hyderabad (ICFAI Foundation for Higher Education), Telangana, India)

  • Pathak, Rajesh

    (Indian Institute of Management Raipur, Raipur, India)

  • Bhattacharjee, Kaushik

    (IBS Hyderabad (ICFAI Foundation for Higher Education), Telangana, India)

Abstract

In this paper, we show a nonlinear relation between promoter ownership and dividends in the Indian context, that is, promoters pay more dividends at lower level of their ownership while they pay lesser dividends when their ownership increases beyond a threshold. In particular, we find that the adverse impact of promoter ownership on dividends is greater only at higher level of ownership, where promoters become entrenched with their effective control, and outsiders face the greatest risk of expropriation. We contend that agency and information asymmetry problems are the factors driving our results. We establish this by showing that the nonlinear relation between promoter ownership and dividend payment is more pronounced for standalone firms than group affiliated firms, for firms with more free cash flows and for firms with smaller board and less number of independent directors in the board. Our results are robust to endogeneity concerns and testing the dividend payment decision (to pay or not to pay) using the binary choice logit model.

Suggested Citation

  • Singh, Geeta & Kumar, Satish & Pathak, Rajesh & Bhattacharjee, Kaushik, 2023. "Does Promoter Ownership Affect Dividend Policy? An Agency Problem Perspective," American Business Review, Pompea College of Business, University of New Haven, vol. 26(2), pages 288-313, November.
    • Handle: RePEc:ris:ambsrv:0081
    as

    Download full text from publisher

    File URL: https://digitalcommons.newhaven.edu/americanbusinessreview/vol26/iss2/2/
    File Function: Full text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Promoter Ownership; Dividend; Agency Problem; Information Asymmetry; India;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

    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:ris:ambsrv:0081. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Amber Montano (email available below). General contact details of provider: https://edirc.repec.org/data/cbnhaus.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.