Common Ownership and Firm Dividend Policies
32 Pages Posted: 21 May 2018 Last revised: 1 Dec 2018
Date Written: September 13, 2018
This paper examines the relationship between common ownership and dividend policy of firms. Using a detailed dataset on investors’ holdings we find that dividend policies of firms that are newly added to a portfolio evolve towards the dividend policies of firms that are already in the portfolio of the new owner. This relation is strongest for owners that are financial institutions that have high turnover and large portfolios. The effect is more pronounced when the new owner purchases firms with low concentrated institutional ownership, high ownership diversity, high fraction of institutional investors, absence of a large controlling family owner and low ownership of the CEO. Overall, our results suggest that owners have a “dividend policy taste”, are influential in dividend decisions, and that their influence depends on the type of co-owner, and on the governance and existing ownership of the firm.
Keywords: common ownership, dividends, institutional investors, family ownership
JEL Classification: G32, G35
Suggested Citation: Suggested Citation