Investment and Deleveraging Financed by Dividends: Evidence from Japanese Business Groups
54 Pages Posted: 9 May 2018 Last revised: 24 Mar 2022
Date Written: March 22, 2022
Abstract
With a large sample of Japanese firms and information on their ownership structure, we find that firms belonging to business groups (“keiretsu”) pay more cash dividends than non-keiretsu firms, especially when the affiliated dividend-receiving firms are in financial distress, have better investment opportunities, or a stronger linkage to the dividend-paying firms. Using exogenous changes to taxes on corporate dividends, difference-in-differences, and falsification tests, we further establish that keiretsu firms’ dividend payouts have a causal impact on receiving firms’ investment and debt policies. Our results highlight the importance of intra-group financing, even for firms in a developed economy.
Keywords: Japan, business group, cross-holding, dividend, investment, leverage
JEL Classification: G2, O1, R2
Suggested Citation: Suggested Citation