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Do Shareholder Coalitions Modify Dominant Owner's Control? The Impact On Dividend Policy

Author

Listed:
  • Felix J. Lopez-Iturriaga

    (National Research University Higher School of Economics)

  • Domingo Javier Santana-Martin

    (Universidad de Las Palmas de Gran Canaria)

Abstract

We examine the effect of shareholder coalitions on the corporate payout policy in Spain, a context characterized by the presence of dominant shareholders. Our results show that shareholder coalitions affect payout policy negatively (both for dividends and shares repurchases). This finding suggests that shareholder coalitions serve as an instrument for the dominant shareholder’s to extract private benefits. We also find that the relation between the voting rights involved in the coalition and the dominant owner?s voting rights is negatively related to dividends. This result means that the dominant owner uses the coalition as a mechanism to amplify his or her control over the firm and reduce the cost of expropriation. The results provide new evidence on the effects of corporate control mechanisms on shareholders wealth; this evidence is complementary to the US or UK centered research, where dominant ownership is not as prevalent and, thus, it is more difficult to capture these effects

Suggested Citation

  • Felix J. Lopez-Iturriaga & Domingo Javier Santana-Martin, 2015. "Do Shareholder Coalitions Modify Dominant Owner's Control? The Impact On Dividend Policy," HSE Working papers WP BRP 41/FE/2015, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:41/fe/2015
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    shareholder coalitions; dividends; repurchases; dominant owner; ownership structure; payout;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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