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Impact of Foreign Institutional Investors on Dividend Policy in Korea: A Stock Market Perspective

Journal of Financial Management and Analysis, Vol. 23, No. 1, January-June 2010

18 Pages Posted: 10 Oct 2010 Last revised: 20 Oct 2010

Shinae Kang

Sungkyunkwan University - School of Business Administration

Wonsik Sul

Sookmyung Women's University - Division of Business Administration

Soojung Kim

Kyung Hee Cyber University

Date Written: June 4, 2010

Abstract

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.

Keywords: Foreign Institutional Investor, Foreign Shareholder, Dividend Policy, Corporate Governance

JEL Classification: C52, G24, N25, O16

Suggested Citation

Kang, Shinae and Sul, Wonsik and Kim, Soojung, Impact of Foreign Institutional Investors on Dividend Policy in Korea: A Stock Market Perspective (June 4, 2010). Journal of Financial Management and Analysis, Vol. 23, No. 1, January-June 2010. Available at SSRN: https://ssrn.com/abstract=1686983

Shinae Kang (Contact Author)

Sungkyunkwan University - School of Business Administration ( email )

206 International Hall
Seoul 110-745, 110-745
Korea, Republic of (South Korea)

Wonsik Sul

Sookmyung Women's University - Division of Business Administration ( email )

Korea, Republic of (South Korea)

Soojung Kim

Kyung Hee Cyber University ( email )

Seoul
Korea, Republic of (South Korea)

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