Unraveling the Dynamics of Corporate Dividend Policy: Evidence from the Property-Liability Insurance Industry

What drives corporate dividend policy remains an unsettled issue, largely due to data limitations, as many privately held firms do not need to disclose their financial reports publicly. We examine and compare the dividend policies of firms with three distinct ownership structures—publicly held stock insurers, privately held stock insurers, and mutual insurers—within the U.S. property-liability insurance industry. Our findings indicate that publicly held insurers are more likely to distribute dividends and tend to pay higher dividends compared to privately held insurers, with mutual insurers paying the least in the matched sample. We found that mutual insurers’ dividend policies are more sensitive to cash flow, whereas stock insurers’ policies are more responsive to profits. We show that private insurers have significantly less smoothness in dividend policies. Our findings highlight the significant role that ownership structure plays in shaping corporate dividend policies.