The Effect of Ownership Concentration and Composition on Dividends: Evidence from Latin America

Abstract

We analyze a unique data set of publicly traded firms based in six Latin American countries to study the joint effect of ownership concentration and composition on dividend policy. We find that when ownership concentration is high, and the largest investor is identified as an individual, firms tend to pay fewer dividends, consistent with individual investors extracting benefits from minority shareholders. However, if the largest shareholder is based in a common-law country, the dividend paid is significantly higher. Finally, the higher the ownership of the second-largest shareholder, the firms decrease the dividends, suggesting a monitoring role of a large shareholder.

Keywords: Dividends; ownership concentration; international corporate governance

JEL Classification: G34, G35