The Link between Dividend Policy and Institutional Ownership

By H. Short, Hao Zhang, Kevin Keasey. 2002

463 citations recorded by the source corpus.

This paper examines the relatively neglected link between dividend policy and institutional ownership. It is also the first example of using well-established dividend payout models to examine the potential association between ownership structures and dividend policy. Moreover, the paper presents the first results for the UK, where the institutional framework and ownership structures are different from those of the US. Using a UK panel data set, the role of institutional ownership in association to dividend payout ratios is analysed within the context of the dividend models of Lintner [American Economic Review, 46 (1956) 97], Waud [Journal of the American Statistical Association, 1996] and Fama and Babiak [Journal of the American Statistical Association, 63 (1968) 1132]. The results consistently produce strong support for the hypothesis that a positive association exists between dividend payout policy and institutional ownership. Furthermore, the results for an earnings trend model suggest a positive earnings trend component to the association between institutional ownership and the dividend payout ratio. In addition, there is some evidence in support of the hypothesis that a negative association exists between dividend payout policy and managerial ownership.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/f7f1bd44948fcffa047701fa00f3f87a23149dcc

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Citations in the corpus

Does corporate governance explain dividend policy in Sub‐Saharan Africa? (2013, background): “The results here support the findings of Short et al. (2002) who established a positive association between institutional ownership and dividend payout ratio.”
Ownership Concentration and Executive Compensation in Closely Held Firms: Evidence from Hong Kong (2005, background): “Short et al. (2002) also use a tax explanation when examining the relationship between dividend payouts and institutional ownership in the U.K..”
Ownership Structure and Dividend Policy: Evidence from Thailand (2012, background): “This is consistent with Short et al.’s (2002) evidence showing a positive association between institutional ownership and dividend payout ratio in the UK.”
How relevant is dividend policy under low shareholder protection? (2015, unknown): “The authors closely investigate full adjustment models (Short et al., 2002) and Waud models (1966), as well as allow the adjustment of dividends to earnings changes to be asymmetric (Gugler and Yurtoglu, 2003).”
Payout Policy, Agency Conflicts, and Corporate Governance (2006, unknown): “In contrast, Short, Zhang, and Keasey (2002) find a strong positive relation.”
Control Structures and Payout Policy (2007, unknown): “This may be one of the main reasons for the differences in results between our paper and some other studies (e.g. Moh’d et al., 1995; Short et al., 2002).”
Do Family Firms Use Dividend Policy as a Governance Mechanism? Evidence from the Euro Zone (2012, result): “In addition, by paying special attention to a corporate governance tool, such as firms’ dividend decisions, in the Euro zone, we complement prior research on dividend policies of UK and US corporations (Barclay et al., 2009; Short et al., 2002).”
Company Dividends and Ownership Structure: Evidence from UK Panel Data (2006, unknown): “Also controlling for xed effects, Trojanowski (2004) employs a GMM system estimator for a sample of 985 rms over the period 1992-1998.”