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Stakeholder conflicts and dividend policy

Author

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  • Bøhren, Øyvind
  • Josefsen, Morten G.
  • Steen, Pål E.

Abstract

This paper compares the dividend policy of owner-controlled firms with that of firms where the owners are a minority relative to non-owner employees, customers, and community citizens. We find that regardless of whether owners or non-owners control the firm, the strong stakeholder uses the dividend payout decision to mitigate rather than to intensify the conflict of interest with the weak stakeholder. Hence, the higher the potential agency cost as reflected in the firm’s stakeholder structure, the more the actual agency cost is reduced by the strong stakeholder’s dividend payout decision. These findings are consistent with a dividend policy in which opportunistic power abuse in stakeholder conflicts is discouraged by costly consequences for the abuser at a later stage. Indirect evidence supports this interpretation.

Suggested Citation

  • Bøhren, Øyvind & Josefsen, Morten G. & Steen, Pål E., 2012. "Stakeholder conflicts and dividend policy," Journal of Banking & Finance, Elsevier, vol. 36(10), pages 2852-2864.
  • Handle: RePEc:eee:jbfina:v:36:y:2012:i:10:p:2852-2864
    DOI: 10.1016/j.jbankfin.2012.06.007
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Firth, Michael & Gao, Jin & Shen, Jianghua & Zhang, Yuanyuan, 2016. "Institutional stock ownership and firms’ cash dividend policies: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 65(C), pages 91-107.
    2. Onali, Enrico & Galiakhmetova, Ramilya & Molyneux, Philip & Torluccio, Giuseppe, 2016. "CEO power, government monitoring, and bank dividends," Journal of Financial Intermediation, Elsevier, vol. 27(C), pages 89-117.
    3. Benoît D'Udekem, 2014. "Rational Dividend Addiction in Banking," Working Papers CEB 14-013, ULB -- Universite Libre de Bruxelles.
    4. Howard Bodenhorn, 2014. "Voting Rights, Shareholdings, and Leverage at Nineteenth-Century U.S. Banks," Journal of Law and Economics, University of Chicago Press, vol. 57(2), pages 431-458.
    5. Bøhren, Øyvind & Josefsen, Morten G., 2013. "Stakeholder rights and economic performance: The profitability of nonprofits," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4073-4086.
    6. Laetitia Lepetit & Céline Meslier-Crouzille & Leo Indra Wardhana, 2015. "Do Asymmetric Information and Ownership Structure Matter for Dividend Payout Decisions? Evidence from European Banks," Working Papers hal-01186722, HAL.
    7. Wang, Jin-Ying, 2014. "Controlling shareholder entrenchment: Bonuses versus dividends," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 143-158.

    More about this item

    Keywords

    Organizational form; Corporate governance; Stakeholders; Dividends; Banks;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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