Corporate Governance and Payout Policy: Do Founding Families Have a Special 'Taste for Dividends'?

Abstract

This paper analyzes how the predominant example of a controlling shareholder, i.e., the firms’ founders and their families, influence payout policy. Using a panel dataset of 660 listed firms in the 1995 to 2006 period from Germany, we find that family firms exhibit a higher propensity and level for dividend payouts. Further tests indicate that this result is driven (i) by family ownership, not management and (ii) restricted to later-generation family firms. These findings are consistent with the view that the desire of families for a steady income stream without losing control shapes payout decisions in family firms.

Keywords: Dividend policy, share repurchases, payout policy, family firms

JEL Classification: G35