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Ownership structure influencing the joint determination of dividend, leverage, and cost of capital

Author

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  • Abhinav Kumar Rajverma
  • Rakesh Arrawatia
  • Arun Kumar Misra
  • Abhijeet Chandra

Abstract

The article analyses inter-dependencies between dividend, capital structure, and cost of capital, factoring the ownership structure of listed firms in India, using 3SLS system approach. The study finds that family firms are dominant with concentrated ownership. Dividend, leverage, and average cost of capital are inter-linked. However, family firms pay lower dividends, consistent with family owners extracting rent from external minority shareholders. Additionally, these firms have high leverage and lower cost of capital, suggesting that family control (reputation) provides intangible value to the firms. Ownership structure plays a critical role in understanding the policy decisions in emerging markets.

Suggested Citation

  • Abhinav Kumar Rajverma & Rakesh Arrawatia & Arun Kumar Misra & Abhijeet Chandra, 2019. "Ownership structure influencing the joint determination of dividend, leverage, and cost of capital," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1600462-160, January.
    • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1600462
    DOI: 10.1080/23322039.2019.1600462
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    Cited by:

    1. Anshu Agrawal, 2021. "Impact of Elimination of Dividend Distribution Tax on Indian Corporate Firms Amid COVID Disruptions," JRFM, MDPI, vol. 14(9), pages 1-38, September.
    2. Ayman Hassan Bazhair & Mohammed Naif Alshareef, 2022. "Dynamic relationship between ownership structure and financial performance: a Saudi experience," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2098636-209, December.
    3. Katarina Valaskova & George Lazaroiu & Judit Olah & Anna Siekelova & Barbora Lancova, 2019. "How Capital Structure Affects Business Valuation: A Case Study of Slovakia," Central European Business Review, Prague University of Economics and Business, vol. 2019(3), pages 1-17.

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