IDEAS home Printed from https://ideas.repec.org/a/bla/eufman/v14y2008i3p470-502.html
   My bibliography  Save this article

Minority Protection and Dividend Policy in Finland

Author

Listed:
  • Seppo Kinkki

Abstract

This paper highlights some theoretical arguments and empirical results on whether legal‐based minority protection affects corporate cash dividends in Finland. The Company Act in Finland states that shareholders having one tenth of all shares can demand a so‐called minority dividend, which is half of the profit of the fiscal year, yet not more than 8% of the equity. Minority dividend, as in Finland, is rarely used in EU countries. I find, that minority protection is a better influence over managerial control than controlling shareholders having absolute voting power. When there is no controlling shareholder and coalition costs are lowest, minority protection in Finland is better than minority protection in mandatory dividend countries. Combining strong shareholder rights (as in the USA) and minority dividend (as in Finland) could decrease agency costs both vertically and horizontally.

Suggested Citation

  • Seppo Kinkki, 2008. "Minority Protection and Dividend Policy in Finland," European Financial Management, European Financial Management Association, vol. 14(3), pages 470-502, June.
  • Handle: RePEc:bla:eufman:v:14:y:2008:i:3:p:470-502
    DOI: 10.1111/j.1468-036X.2007.00408.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-036X.2007.00408.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1468-036X.2007.00408.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
    2. Markus Herrmann & Günter Franke, 2002. "Performance and Policy of Foundation‐owned Firms in Germany," European Financial Management, European Financial Management Association, vol. 8(3), pages 261-279, September.
    3. Eugene F. Fama & Kenneth R. French, 2001. "Disappearing Dividends: Changing Firm Characteristics Or Lower Propensity To Pay?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(1), pages 67-79, March.
    4. Espen Eckbo, B. & Verma, Savita, 1994. "Managerial shareownership, voting power, and cash dividend policy," Journal of Corporate Finance, Elsevier, vol. 1(1), pages 33-62, March.
    5. Cronqvist, Henrik & Nilsson, Mattias, 2003. "Agency Costs of Controlling Minority Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(4), pages 695-719, December.
    6. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    7. Wolfgang Drobetz & Andreas Schillhofer & Heinz Zimmermann, 2004. "Corporate Governance and Expected Stock Returns: Evidence from Germany," European Financial Management, European Financial Management Association, vol. 10(2), pages 267-293, June.
    8. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    9. Luigi Zingales, 1995. "What Determines the Value of Corporate Votes?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1047-1073.
    10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    11. La Porta, Rafael & Lopez-De-Silanes, Florencio & Shleifer, Andrei, 1999. "Corporate Ownership Around the World," Scholarly Articles 30747162, Harvard University Department of Economics.
    12. Anete Pajuste, 2002. "Corporate governance and stock market performance in Central and Eastern Europe: a study of nine countries, 1994-2001," UCL SSEES Economics and Business working paper series 22, UCL School of Slavonic and East European Studies (SSEES).
    13. Eva Liljeblom & Daniel Pasternack, 2006. "Share Repurchases, Dividends and Executive Options: the Effect of Dividend Protection," European Financial Management, European Financial Management Association, vol. 12(1), pages 7-28, January.
    14. Rafael La Porta & Florencio Lopez‐de‐Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, February.
    15. James S. Ang & Rebel A. Cole & James Wuh Lin, 2000. "Agency Costs and Ownership Structure," Journal of Finance, American Finance Association, vol. 55(1), pages 81-106, February.
    16. Jensen, Gerald R. & Solberg, Donald P. & Zorn, Thomas S., 1992. "Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(2), pages 247-263, June.
    17. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 08-96, Wharton School Rodney L. White Center for Financial Research.
    18. Denis, David J. & Denis, Diane K., 1994. "Majority owner-managers and organizational efficiency," Journal of Corporate Finance, Elsevier, vol. 1(1), pages 91-118, March.
    19. Ernst Maug, 1998. "Large Shareholders as Monitors: Is There a Trade-Off between Liquidity and Control?," Journal of Finance, American Finance Association, vol. 53(1), pages 65-98, February.
    20. Saugata Banerjee & Benoit Leleux & Theo Vermaelen, 1997. "Large Shareholdings and Corporate Control: An Analysis of Stake Purchases by French Holding Companies," European Financial Management, European Financial Management Association, vol. 3(1), pages 23-43, March.
    21. Mike Burkart & Denis Gromb & Fausto Panunzi, 2000. "Agency Conflicts in Public and Negotiated Transfers of Corporate Control," Journal of Finance, American Finance Association, vol. 55(2), pages 647-677, April.
    22. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    23. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
    24. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
    25. Miguel A. Ferreira & Antonio S. Vilela, 2004. "Why Do Firms Hold Cash? Evidence from EMU Countries," European Financial Management, European Financial Management Association, vol. 10(2), pages 295-319, June.
    26. Armando Gomes, 2000. "Going Public without Governance: Managerial Reputation Effects," Journal of Finance, American Finance Association, vol. 55(2), pages 615-646, April.
    27. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-1177, December.
    28. DeAngelo, Harry & DeAngelo, Linda, 1990. "Dividend Policy and Financial Distress: An Empirical Investigation of Troubled NYSE Firms," Journal of Finance, American Finance Association, vol. 45(5), pages 1415-1431, December.
    29. Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October.
    30. Paul D Koch & Catherine Shenoy, 1999. "The Information Content of Dividend and Capital Structure Policies," Financial Management, Financial Management Association, vol. 28(4), Winter.
    31. Sorjonen, Pasi, . "Essays on Dividends and Taxes," ETLA A, The Research Institute of the Finnish Economy, number 30.
    32. DeAngelo, Harry & DeAngelo, Linda & Skinner, Douglas J., 1994. "Accounting choice in troubled companies," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 113-143, January.
    33. Anup Agrawal & Charles R. Knoeber, "undated". "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
    34. Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(3), pages 377-397, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Huang, Juan Juan & Shen, Yifeng & Sun, Qian, 2011. "Nonnegotiable shares, controlling shareholders, and dividend payments in China," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 122-133, February.
    2. An Rommens & Ludo Cuyvers & Marc Deloof, 2012. "Dividend Policies of Privately Held Companies: Stand†Alone and Group Companies in Belgium," European Financial Management, European Financial Management Association, vol. 18(5), pages 816-835, November.
    3. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2014. "Controlling shareholder, split-share structure reform and cash dividend payments in China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 339-357.
    4. Ghosh, Saibal, 2010. "The dividend strategy of Indian companies: An empirical assessment," MPRA Paper 29567, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2014. "Controlling shareholder, split-share structure reform and cash dividend payments in China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 339-357.
    2. Igor Filatotchev & Yung-Chih Lien & Jenifer Piesse, 2005. "Corporate Governance and Performance in Publicly Listed, Family-Controlled Firms: Evidence from Taiwan," Asia Pacific Journal of Management, Springer, vol. 22(3), pages 257-283, September.
    3. Yen, Tze-Yu & Andre, Paul, 2007. "Ownership structure and operating performance of acquiring firms: The case of English-origin countries," Journal of Economics and Business, Elsevier, vol. 59(5), pages 380-405.
    4. Yener Altunbaş & Alper Kara & Adrian van Rixtel, 2007. "Corporate governance and corporate ownership: The investment behaviour of Japanese institutional investors," Occasional Papers 0703, Banco de España.
    5. Trojanowski, G., 2004. "Ownership structure as a mechanism of corporate governance," Other publications TiSEM 5dbc874d-d1d0-44a5-9717-8, Tilburg University, School of Economics and Management.
    6. Lukas Setia‐Atmaja & George A. Tanewski & Michael Skully, 2009. "The Role of Dividends, Debt and Board Structure in the Governance of Family Controlled Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(7‐8), pages 863-898, September.
    7. Duha Al-Kuwari, 2012. "Are Large Shareholders Conducting Influential Monitoring in Emerging Markets? An Investigation into the Impact of Large Shareholders on Dividend Decisions: The Case of Kuwait," Research in World Economy, Research in World Economy, Sciedu Press, vol. 3(2), pages 52-67, September.
    8. Attiya Y. Javid & Robina Iqbal, 2010. "Corporate Governance in Pakistan : Corporate Valuation, Ownership and Financing," Governance Working Papers 22830, East Asian Bureau of Economic Research.
    9. Zeineb Barka & Taher Hamza, 2020. "The effect of large controlling shareholders on equity prices in France: monitoring or entrenchment?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 769-798, September.
    10. Kun Wang & Greg Shailer, 2015. "Ownership Concentration And Firm Performance In Emerging Markets: A Meta-Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 199-229, April.
    11. Mulyani, Evy & Singh, Harminder & Mishra, Sagarika, 2016. "Dividends, leverage, and family ownership in the emerging Indonesian market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 16-29.
    12. Yasuharu Aoki, 2014. "How Does the Largest Shareholder Affect Dividends?," International Review of Finance, International Review of Finance Ltd., vol. 14(4), pages 613-645, December.
    13. Hussein Abedi Shamsabadi & Byung-Seong Min & Richard Chung, 2016. "Corporate governance and dividend strategy: lessons from Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(5), pages 583-610, October.
    14. Mertzanis, Charilaos & Basuony, Mohamed A.K. & Mohamed, Ehab K.A., 2019. "Social institutions, corporate governance and firm-performance in the MENA region," Research in International Business and Finance, Elsevier, vol. 48(C), pages 75-96.
    15. Yves Bozec & Claude Laurin, 2004. "Concentration des droits de propriété, séparation entre participation au capital et contrôle des votes et performance opérationnelle des sociétés:une étude canadienne," Revue Finance Contrôle Stratégie, revues.org, vol. 7(2), pages 123-164, June.
    16. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    17. Oxelheim, Lars & Randoy, Trond, 2003. "The impact of foreign board membership on firm value," Journal of Banking & Finance, Elsevier, vol. 27(12), pages 2369-2392, December.
    18. Ghosh, Saibal, 2007. "Leverage, managerial monitoring and firm valuation: A simultaneous equation approach," Research in Economics, Elsevier, vol. 61(2), pages 84-98, June.
    19. Richardson, Grant & Wang, Bei & Zhang, Xinmin, 2016. "Ownership structure and corporate tax avoidance: Evidence from publicly listed private firms in China," Journal of Contemporary Accounting and Economics, Elsevier, vol. 12(2), pages 141-158.
    20. Seifert, Bruce & Gonenc, Halit & Wright, Jim, 2005. "The international evidence on performance and equity ownership by insiders, blockholders, and institutions," Journal of Multinational Financial Management, Elsevier, vol. 15(2), pages 171-191, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:eufman:v:14:y:2008:i:3:p:470-502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efmaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.