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Effects of foreign ownership on payout policy: Evidence from the Korean market

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  • Jeon, Jin Q.
  • Lee, Cheolwoo
  • Moffett, Clay M.

Abstract

In this paper, we examine the relationship between foreign ownership and the decisions on payout policy in the Korean stock market. The evidence indicates that foreign investors show a preference for firms that pay high dividends. When they have substantial shareholdings, foreign investors lead firms to pay more dividends. The results are driven by the fact that most of the foreign investors in the Korean market are institutional investors and thus have both dividend clienteles and monitoring incentives. However, foreign investors neither express preference for firms that buy back shares, nor are they associated with encouraging firms to increase repurchases. The results are robust after controlling for endogeneity. We find little evidence that domestic institutions have a significant effect on payout policy.

Suggested Citation

  • Jeon, Jin Q. & Lee, Cheolwoo & Moffett, Clay M., 2011. "Effects of foreign ownership on payout policy: Evidence from the Korean market," Journal of Financial Markets, Elsevier, vol. 14(2), pages 344-375, May.
  • Handle: RePEc:eee:finmar:v:14:y:2011:i:2:p:344-375
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    Cited by:

    1. Rihanat Idowu Abdulkadir & Nur Adiana Hiau Abdullah & Wong Woei-Chyuan, 2015. "Dividend Policy Changes in The Pre-, Mid-, and Post-Financial Crisis: Evidence from The Nigerian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 103-126.
    2. Irene Wei Kiong Ting & Hooi Hooi Lean & Qian Long Kweh & Noor Azlinna Azizan, 2016. "Managerial overconfidence, government intervention and corporate financing decision," International Journal of Managerial Finance, Emerald Group Publishing, vol. 12(1), pages 4-24, February.
    3. repec:eee:iburev:v:26:y:2017:i:5:p:816-827 is not listed on IDEAS
    4. repec:eco:journ1:2017-02-86 is not listed on IDEAS
    5. Wang, Jin-Ying, 2014. "Controlling shareholder entrenchment: Bonuses versus dividends," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 143-158.
    6. Won Oh & Young Chang & Aleksey Martynov, 2011. "The Effect of Ownership Structure on Corporate Social Responsibility: Empirical Evidence from Korea," Journal of Business Ethics, Springer, vol. 104(2), pages 283-297, December.
    7. Abdallah, Abed Al-Nasser & Ismail, Ahmad K., 2017. "Corporate governance practices, ownership structure, and corporate performance in the GCC countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 98-115.
    8. Zeitun Rami, 2014. "Corporate Governance, Capital Structure and Corporate Performance: Evidence from GCC Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 10(1), pages 1-22, April.
    9. repec:eee:jocaae:v:11:y:2015:i:2:p:138-147 is not listed on IDEAS
    10. Lee, Sanglae, 2015. "Corporate Governance And Firm Performance: Evidence From Institutional Investors And Proxy Voting In Korea," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(1), pages 35-53, June.
    11. Pawan Jain & Quentin Chu, 2014. "Dividend clienteles: a global investigation," Review of Quantitative Finance and Accounting, Springer, vol. 42(3), pages 509-534, April.
    12. Tung-Hao Lee & Jiun-Kai Huang, 2013. "Financial Liberalization, Foreign Ownership and Corporate Operational Efficiency: The Case of Taiwan Market," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 34-47, August.

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