Do Shareholder Coalitions Modify Dominant Owner's Control? The Impact on Dividend Policy

32 Pages Posted: 20 Jan 2015

See all articles by Félix J. López-Iturriaga

Félix J. López-Iturriaga

Universidad de Valladolid - Department of Finance and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Domingo J. J. Santana‐Martín

University of Las Palmas de Gran Canaria

Multiple version iconThere are 2 versions of this paper

Date Written: January 20, 2015

Abstract

We examine the effect of shareholder coalitions on the corporate payout policy in Spain, a context characterized by the presence of dominant shareholders. Our results show that shareholder coalitions affect payout policy negatively (both for dividends and shares repurchases). This finding suggests that shareholder coalitions serve as an instrument for the dominant shareholder’s to extract private benefits. We also find that the relation between the voting rights involved in the coalition and the dominant owner´s voting rights is negatively related to dividends. This result means that the dominant owner uses the coalition as a mechanism to amplify his or her control over the firm and reduce the cost of expropriation. The results provide new evidence on the effects of corporate control mechanisms on shareholders wealth; this evidence is complementary to the US or UK centered research, where dominant ownership is not as prevalent and, thus, it is more difficult to capture these effects.

Keywords: shareholder coalitions; dividends; repurchases; dominant owner; ownership structure; payout

JEL Classification: G32; G34

Suggested Citation

Lopez-Iturriaga, Felix Javier and Santana-Martín, Domingo J., Do Shareholder Coalitions Modify Dominant Owner's Control? The Impact on Dividend Policy (January 20, 2015). Higher School of Economics Research Paper No. WP BRP 41/FE/2015 , Available at SSRN: https://ssrn.com/abstract=2552439 or http://dx.doi.org/10.2139/ssrn.2552439

Felix Javier Lopez-Iturriaga (Contact Author)

Universidad de Valladolid - Department of Finance and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Domingo J. Santana-Martín

University of Las Palmas de Gran Canaria ( email )

C/Juan de Quesada, No. 30
Las Palmas de Gran Canaria, Las Palmas 35017
Spain

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