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Majority support of shareholders, monitoring incentive, and dividend policy

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  • Mori, Naoya
  • Ikeda, Naoshi

Abstract

As an alternative version of the side-payment model, this paper presents a demonstration of how the necessity of winning majority support of shareholders influences the relation between a blockholder's monitoring incentive and a firm's dividend policy. When dividend-averse individuals collectively hold a majority stake in a dispersed ownership structure, a dividend-seeking blockholder might be compelled to propose lower dividends than the tax-optimum to dominate the zero-dividend proposal. Under such circumstances, the blockholder has an incentive to provide unprofitable monitoring activity as long as the private benefits of tax-saving are greater than the pecuniary loss from the monitoring activity.

Suggested Citation

  • Mori, Naoya & Ikeda, Naoshi, 2015. "Majority support of shareholders, monitoring incentive, and dividend policy," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 1-10.
    • Handle: RePEc:eee:corfin:v:30:y:2015:i:c:p:1-10
    DOI: 10.1016/j.jcorpfin.2014.10.015
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    Cited by:

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    3. Jorge Andrés Munoz Mendoza & Sandra María Sepúlveda Yelpo & Carmen Lissette Veloso Ramos, 2018. "Effects of Corporate Policies and Governance Practices on Ownership Structure: Evidence from Chilean Firms," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 10(2), pages 269-286, November.
    4. Cheung, William Mingyan & Chung, Richard & Fung, Scott, 2015. "The effects of stock liquidity on firm value and corporate governance: Endogeneity and the REIT experiment," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 211-231.

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    More about this item

    Keywords

    Ownership structure; Corporate governance; Tax preferences;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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