Controlling Shareholders' Opportunism: The Case of Share Repurchase and Cash Dividends

36 Pages Posted: 13 Jan 2009

See all articles by Hyo Jin Kim

Hyo Jin Kim

affiliation not provided to SSRN

Hoje Jo

Santa Clara University

Soon Suk Yoon

Chonnam National University - Department of Economics

Date Written: January 11, 2009

Abstract

This study examines how share repurchase and dividend policies are influenced by controlling shareholders in an emerging market. Share repurchase can be utilized opportunistically by controlling shareholders, particularly when they exercise voting rights in excess of cash-flow rights. The evidence of Korean firms shows that firms with a big wedge between the voting rights and cash-flow rights repurchase more shares, while firms with a small wedge distribute more cash dividends. In addition, we find that cash flows are significantly lower for firms with share-repurchase only than for those with neither share repurchase nor dividends. Overall, our results indicate that controlling shareholders use share repurchase as a temporary opportunism.

Keywords: Controlling shareholders, share repurchases, dividends, wedge, cash-flow rights, voting rights

JEL Classification: G32, G35, G34, D82, G15

Suggested Citation

Kim, Hyo Jin and Jo, Hoje and Yoon, Soon Suk, Controlling Shareholders' Opportunism: The Case of Share Repurchase and Cash Dividends (January 11, 2009). Available at SSRN: https://ssrn.com/abstract=1325949 or http://dx.doi.org/10.2139/ssrn.1325949

Hyo Jin Kim

affiliation not provided to SSRN ( email )

Hoje Jo

Santa Clara University ( email )

Santa Clara, CA 95053
United States
408-224-8890 (Phone)
408-554-4029 (Fax)

Soon Suk Yoon (Contact Author)

Chonnam National University - Department of Economics ( email )

77 Yongbongro, Buk-gu, Gwangju
Seoul, 500-757
Korea, Republic of (South Korea)

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