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

15 Pages Posted: 6 Nov 2015

See all articles by Félix J. López-Iturriaga

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics 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

Date Written: November 2015

Abstract

Manuscript Type. Empirical.

Research Question. We examine the effect of shareholder coalitions on the corporate payout policy in Spain, a context characterized by the presence of dominant shareholders.

Research Findings. Our results show that shareholder coalitions affect payout policy negatively (both for dividends and shares repurchases). We also find that the divergence between the voting rights involved in the coalition and the dominant owner's voting rights is negatively related to dividends.

Theoretical/Academic Implications. Our findings suggest that shareholder coalitions can serve as an instrument for the dominant shareholders to extract private benefits. Our results also mean 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.

Practitioner/Policy Implications. Regulators should pay attention to the double role of shareholder agreements, as these coalitions could become an entrenchment mechanism for dominant shareholders. Our results highlight the importance of considering shareholder agreements when investors analyze the corporate dividend policy.

Keywords: Corporate Governance, Shareholder Coalitions, Dividends, Dominant Owner, Ownership Structure

Suggested Citation

Lopez-Iturriaga, Felix Javier and Santana-Martín, Domingo J., Do Shareholder Coalitions Modify the Dominant Owner's Control? The Impact on Dividend Policy (November 2015). Corporate Governance: An International Review, Vol. 23, Issue 6, pp. 519-533, 2015. Available at SSRN: https://ssrn.com/abstract=2686912 or http://dx.doi.org/10.1111/corg.12126

Felix Javier Lopez-Iturriaga (Contact Author)

University of Valladolid - Department of Financial Economics and Accounting ( email )

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

HOME PAGE: http://www2.eco.uva.es/flopez

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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