Corporate Governance and Dividend Policy: Evidence of Tunneling from Master Limited Partnerships

61 Pages Posted: 22 Dec 2018 Last revised: 18 Sep 2019

See all articles by Julian Atanassov

Julian Atanassov

University of Nebraska

Aaron Mandell

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

Date Written: October 4, 2018

Abstract

Using a sample of 85 Delaware master limited partnerships (“MLPs”) from 2004 to 2016, we examine the relation between cash dividend policy and the strength of corporate governance measured by contractual governance provisions, such as fiduciary waiver, mandatory distributions, and voting rights, and by ownership structure. We find support for the tunneling model of dividend determination. Specifically, we document that firms with weaker governance pay out more cash dividends than better governed firms. We also find that, in the presence of low quality governance, these payments reduce firm value as well as the value of the firm's cash holdings, suggesting that they are viewed by the market as a tunneling (extraction) of resources by the general partner at the expense of limited unitholders.

Keywords: Corporate governance, Dividend policy, Master limited partnerships, Tunneling

JEL Classification: G34, G35

Suggested Citation

Atanassov, Julian and Mandell, Aaron, Corporate Governance and Dividend Policy: Evidence of Tunneling from Master Limited Partnerships (October 4, 2018). Journal of Corporate Finance, Vol. 53, 2018, Available at SSRN: https://ssrn.com/abstract=3295928

Julian Atanassov

University of Nebraska ( email )

CBA
University of Nebraska, Lincoln
Lincoln, NE 68588
United States

Aaron Mandell (Contact Author)

University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )

P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States

HOME PAGE: http://uwm.edu

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