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Executive compensation and agency costs in a family controlled corporate governance structure: the case of Italy

Author

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  • Nalinaksha Bhattacharyya
  • Julie Ann Elston
  • Laura Rondi

Abstract

This paper examines whether dividends are an important mechanism for mitigating agency costs in Italy. Corporate governance in Italy is distinguished by the fact that large numbers of firms are family controlled. Examining a panel of listed Italian firms from 2000-2007, we find that dividends play a significant role in mitigating agency costs, as they do in many countries. Empirical findings further suggest that increases in family control lead to a higher dividend payout; while higher levels of executive compensation leads to a lower dividend payout. Overall, findings suggest that dividends are effective at mitigating agency costs in the environment where family control over corporate governance is prevalent.

Suggested Citation

  • Nalinaksha Bhattacharyya & Julie Ann Elston & Laura Rondi, 2014. "Executive compensation and agency costs in a family controlled corporate governance structure: the case of Italy," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 5(3/4), pages 119-132.
    • Handle: RePEc:ids:ijcgov:v:5:y:2014:i:3/4:p:119-132
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    Cited by:

    1. Vincent Molly & Anneleen Michiels, 2022. "Dividend decisions in family businesses: A systematic review and research agenda," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 992-1026, September.
    2. Warwick Anderson & Nalinaksha Bhattacharyya & Cameron Morrill & Helen Roberts, 2020. "Dividend payout and executive compensation: theory and evidence from New Zealand," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1007-1022, April.

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