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Dividends and Expropriation

49 Pages Posted: 19 Apr 2000  

Mara Faccio

Purdue University - Krannert School of Management; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Larry H.P. Lang

The Chinese University of Hong Kong (CUHK) - Department of Finance

Leslie Young

The Chinese University of Hong Kong (CUHK) - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 31, 2000

Abstract

In Western Europe and East Asia, capital markets require higher dividends from corporations tightly affiliated (at the 20% level of control) to a group and, within a group, from corporations whose controlling shareholder has a lower ratio O/C of ownership to control rights. For loosely-affiliated corporations (whose controlling shareholder holds between 10% and 20% of control rights), dividends are positively related to O/C, reflecting expropriation not contained by capital markets. Such corporations comprise 2.94% of European corporations, but 15.44 % of Asian corporations. In our 9 Asian economies, the 11 largest groups at the 10% level comprise 53.75% of all corporations and 84.58% of loosely-affiliated corporations, so most expropriation occurs here. Dividend are higher in Europe than in Asia; having multiple large shareholders increases dividends in Europe but decreases them in Asia.

JEL Classification: G3, G35

Suggested Citation

Faccio, Mara and Lang, Larry H.P. and Young, Leslie, Dividends and Expropriation (July 31, 2000). AFA 2001 New Orleans; EFMA Athens 2000. Available at SSRN: https://ssrn.com/abstract=222428 or http://dx.doi.org/10.2139/ssrn.222428

Mara Faccio (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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European Corporate Governance Institute (ECGI)

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National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

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1 Business Link
Singapore, 117592
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Hsien Ping Larry Lang

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong
+85 2 2609 7761 (Phone)
+85 2 2603 6586 (Fax)

Leslie Young

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong
852 2609 7421 (Phone)

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