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The Effect of Institutional Ownership on Payout Policy: A Regression Discontinuity Design Approach
Alan D. Crane
Rice University - Jesse H. Jones Graduate School of Business
Sebastien Michenaud
Rice University - Jesse H. Jones Graduate School of Business
James Weston
Rice University - Jesse H. Jones Graduate School of Business
December 13, 2012
Abstract:
We show that higher institutional ownership causes firms to pay more dividends and repurchase more shares. Our identification strategy relies on a discontinuity in ownership based on the annual composition of the Russell 1,000 and 2,000 indices. We also find evidence of a causal effect on proxy voting, corporate investment, R&D, and equity issuance. Overall, results support agency models where concentrated ownership lowers the marginal cost of delegated monitoring.
Number of Pages in PDF File: 47
Keywords: Payout, Institutional Investors, Dividends, Share Repurchases, Regression Discontinuity Design
JEL Classification: G35, G32, G30
working papers series
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Date posted: July 9, 2012
; Last revised: December 15, 2012
Suggested CitationCrane, Alan D., Michenaud, Sebastien and Weston, James Peter, The Effect of Institutional Ownership on Payout Policy: A Regression Discontinuity Design Approach (December 13, 2012). Available at SSRN: http://ssrn.com/abstract=2102822 or http://dx.doi.org/10.2139/ssrn.2102822
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