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Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic

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  • Jan Hanousek
  • Jan Bena

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Abstract

Using cross-sectional analysis of corporate dividend policy we show that large shareholders extract rents from forms and expropiate minority shareholders in the weak corporate governance environment of an emerging economy. By comprising divideneds paid across varying corporate ownership structures- concentration, type, and domicile of ownership - we quantify these effects and reveal that they are substantial. We find that the target payout ratio for firms with majotiry ownership is low but that the prescence of a significant minority shareholder increases the target payout ratio and hence precludes a majority owner from extracting rent. In contrast to other studies from developed markets, our unique dataset from teh Czech Republic for the period 1996-2003 permits us to take account of teh endogencity of ownership.

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Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp556.

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Date of creation: Mar 2006
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Handle: RePEc:fmg:fmgdps:dp556

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Citations

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Cited by:
  1. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
  2. Howard Bodenhorn, 2012. "Voting Rights, Share Concentration, and Leverage at Nineteenth-Century US Banks," NBER Working Papers 17808, National Bureau of Economic Research, Inc.
  3. Yusnidah Ibrahim & Md Mohan Uddin & Kamarun Nisham Taufil Mohd & Mohd Sobri Minai, 2013. "Agency Costs and the Long-Run Performance of Debt Issuers," Asian Academy of Management Journal of Accounting and Finance, Penerbit Universiti Sains Malaysia, vol. 9(1), pages 67-87.
  4. Zuzana Fungacova, 2007. "Can the Market Fix a Wrong Administrative Decision? Massive Delisting on the Prague Stock Exchange," CERGE-EI Working Papers wp335, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  5. Estrin, Saul & Hanousek, Jan & Svejnar, Jan, 2009. "Effects of Privatization and Ownership in Transition Economies," Policy Research Working Paper Series 4811, The World Bank.
  6. Juraj Stancik, 2007. "Horizontal and Vertical FDI Spillovers: Recent Evidence from the Czech Republic," CERGE-EI Working Papers wp340, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  7. Anastasiya Shamshur, 2009. "Is the Stability of Leverage Ratios Determined by the Stability of the Economy?," CERGE-EI Working Papers wp393, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  8. Victor DRAGOTA & Carmen LIPARA & Radu CIOBANU, 2013. "Agency Problems and Synergistic Effects in Romania: The Determinants of the Control Premium," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(2), pages 197-219, May.
  9. Juraj Stančík, 2009. "FDI spillovers in the Czech Republic: takeovers vs. greenfields," European Economy - Economic Papers 369, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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