Impact of Foreign Institutional Investors on Dividend Policy in Korea: A Stock Market Perspective
Sungkyunkwan University - School of Business Administration
Sookmyung Women's University - Division of Business Administration
Kyung Hee Cyber University
June 4, 2010
Journal of Financial Management and Analysis, Vol. 23, No. 1, January-June 2010
This paper empirically investigates the impact of foreign institutional investors on corporate dividend policy in the Korean stock market. Using sample firms whose ownership by foreign investors was 5% or higher through the fiscal period from 2001 to 2007, we find that foreign institutional investors with more than 5% of a company’s shares can exert a significant impact on dividends. In addition, we find that the more shares that foreign institutional investors have over major shareholders and the more shares that foreign institutional investors have over the previous year, the stronger the impact of foreign institutional investors have on corporate dividend policy. This study empirically shows the impact of foreign institutional investors from the viewpoint of corporate governance in Korea, where local institutional investors play inadequate roles as stakeholders. It also complements the methodological problems pointed out in previous studies by applying a panel model.
Number of Pages in PDF File: 18
Keywords: Foreign Institutional Investor, Foreign Shareholder, Dividend Policy, Corporate Governance
JEL Classification: C52, G24, N25, O16Accepted Paper Series
Date posted: October 10, 2010 ; Last revised: October 20, 2010
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