Managerial Shareownership, Voting Power, and Cash Dividend Policy

39 Pages Posted: 27 Oct 2008

See all articles by B. Espen Eckbo

B. Espen Eckbo

Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)

Savita Verma

affiliation not provided to SSRN


While the classical dividend irrelevance theory implies that shareholders unanimously support the firm's dividend policy, managerial benefits from free cash flow, heterogenous personal tax rates and information asymmetries give rise to internal shareholder conflicts over the dividend decision. We conjecture that observed dividends resolve this conflict by consensus across heterogeneous shareholder groups. We develop and test this consensus-dividend hypothesis using Canadian firms where managers tend to own a large amount of voting stock. The empirical evidence indicates that cash dividends decrease as the voting power of owner-managers increases, and are almost always zero when owner-managers have absolute voting control of the firm. Panel data estimation as well as factor-analytic techniques give further empirical support for the consensus-dividend hypothesis.

Keywords: Dividend policy, shareholder clieneteles, taxes, free cash flow, consensus dividend, voting power,

JEL Classification: G32, G35

Suggested Citation

Eckbo, B. Espen and Verma, Savita, Managerial Shareownership, Voting Power, and Cash Dividend Policy. Journal of Corporate Finance, Vol. 1, pp. 33-62, 1994, Available at SSRN:

B. Espen Eckbo (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646-3953 (Phone)
603-646-3805 (Fax)


European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Savita Verma

affiliation not provided to SSRN

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