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Shareholder Conflicts and Dividends

50 Pages Posted: 21 Sep 2017  

Janis Berzins

BI Norwegian Business School

Øyvind Bøhren

BI Norwegian Business School - Department of Finance

Bogdan Stacescu

BI Norwegian Business School

Date Written: September 12, 2017

Abstract

We examine how dividend policy is used to mitigate potential conflicts of interest between majority and minority shareholders in private Norwegian firms. The average payout is 50% higher if the majority shareholder’s equity stake is 55% (high conflict potential) rather than 95% (low conflict potential). Such minority-friendly payout is also associated with higher subsequent minority shareholder investment. These results suggest that controlling shareholders voluntarily use dividends to reduce agency conflicts and build trust, rather than opportunistically preferring private benefits to dividends. We show that our results are unlikely to arise from liquidity or signaling motives.

Keywords: Corporate Governance, Ownership, Minority Shareholders, Dividends

JEL Classification: G32, G35

Suggested Citation

Berzins, Janis and Bøhren, Øyvind and Stacescu, Bogdan, Shareholder Conflicts and Dividends (September 12, 2017). Forthcoming, Review of Finance ; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 528/2017. Available at SSRN: https://ssrn.com/abstract=3039401 or http://dx.doi.org/10.2139/ssrn.3039401

Janis Berzins

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Øyvind Bøhren (Contact Author)

BI Norwegian Business School - Department of Finance ( email )

N-0442 Oslo
Norway

Bogdan Stacescu

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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