Effects of Foreign Ownership on Payout Policy: Evidence from the Korean Market

Posted: 28 Jun 2015

See all articles by Jin Jeon

Jin Jeon

Dongguk University

Cheolwoo Lee

Ferris State University

Clay M. Moffett

University of North Carolina (UNC) at Wilmington

Date Written: May 1, 2011

Abstract

In this paper we examine the relationship between foreign ownership and the decisions on payout policy in the Korean stock market. The evidence indicates foreign investors show a preference for firms that pay high dividends. When they have substantial shareholdings, foreign investors lead firms to pay more dividends. The results are driven by the fact that most of the foreign investors in the Korean market are institutional investors and thus have both dividend clienteles and monitoring incentives. However, foreign investors neither express preference for firms that buy back shares, nor are they associated with encouraging firms to increase repurchases. The results are robust after controlling for endogeneity. We find little evidence that domestic institutions have a significant effect on payout policy.

Keywords: Foreign ownership; payout policy; Korean market; dividends; share repurchases

JEL Classification: G15; G18; G35

Suggested Citation

Jeon, Jin and Lee, Cheolwoo and Moffett, Clay M., Effects of Foreign Ownership on Payout Policy: Evidence from the Korean Market (May 1, 2011). Journal of Financial Markets, Vol. 14, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=2623992

Jin Jeon (Contact Author)

Dongguk University ( email )

26 Pil-dong 3-ga
Jung-gu
Seoul, Seoul 100-715
Korea, Republic of (South Korea)

Cheolwoo Lee

Ferris State University ( email )

119 South State Street, BUS 366
Big Rapids, MI 49307
United States

Clay M. Moffett

University of North Carolina (UNC) at Wilmington ( email )

601 South College Road
Wilmington, NC 28403
United States

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