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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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  3. Fama, Eugene F. & French, Kenneth R., 2001. "Disappearing dividends: changing firm characteristics or lower propensity to pay?," Journal of Financial Economics, Elsevier, vol. 60(1), pages 3-43, April. [Downloadable!] (restricted)
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  4. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September. [Downloadable!] (restricted)
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  7. Zwiebel, Jeffrey, 1996. "Dynamic Capital Structure under Managerial Entrenchment," American Economic Review, American Economic Association, vol. 86(5), pages 1197-1215, December. [Downloadable!] (restricted)
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  10. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2005. "Origin and Concentration: Corporate Ownership, Control and Performance," CERGE-EI Working Papers wp259, The Center for Economic Research and Graduate Education - Economic Institute, Prague. [Downloadable!]
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  17. Nandini Gupta & John Ham & Jan Svejnar, 2000. "Priorities and Sequencing in Privatization: Theory and Evidence from the Czech Republic," Econometric Society World Congress 2000 Contributed Papers 1580, Econometric Society. [Downloadable!]
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  18. Mara Faccio & Larry H. P. Lang & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March. [Downloadable!] (restricted)
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  21. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-88, June. [Downloadable!] (restricted)
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