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The Relationship between Ownership Structure and Dividend Policy: An Empirical Investigation

  • Faris Nasif AL- SHUBIRI

    (Amman Arab University –Jordan)

  • Ghassan AL TALEB

    (The World Islamic Sciences University- Jordan)

  • Abd AL – Naser AL- ZOUED

    (The World Islamic Sciences University- Jordan)

This paper examines the possible association between ownership structure, dividend payout policy. It is also one of the very first examples, which tries to detect any potential association in ownership structure, and well established dividend payout models in context of an emerging market .The present study examines the payout behavior of dividends and the association of ownership structure for Jordanian industrial firms over the period 2005-2009. The results consistently support the potential association between ownership structure and dividend payout policy. The results suggest that ownership structure approach is highly relevant to an understanding of corporate dividends policy in Jordan. More precisely, the results indicate that there is a significantly negative correlation between the institutional ownership and dividend per share, and a significantly negative relationship between the state ownership and the level of dividend distributed to shareholders. The results also indicate that the higher the ownership of the five largest shareholders, the higher the dividend payment. The regression results conducted on five models show a strong effect of the free cash-flow on dividend policy. The empirical evidence about the effect of firm size on the level of dividend shows a negative and significant effect. Larger firms are less likely to pay out dividends. Moreover, those firms with better investment opportunities are more likely to pay dividends and firms with high leverage tend to distribute a lower level of dividends.

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Article provided by Faculty of Management, Academy of Economic Studies, Bucharest, Romania in its journal REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT.

Volume (Year): 13 (2012)
Issue (Month): 4 (October)
Pages: 644-657

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Handle: RePEc:rom:rmcimn:v:13:y:2012:i:4:p:644-657
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  1. Lucian Bebchuk & Reinier Kraakman & George Triantis, 1999. "Stock Pyramids, Cross-Ownership, and the Dual Class Equity: The Creation and Agency Costs of Seperating Control from Cash Flow Rights," NBER Working Papers 6951, National Bureau of Economic Research, Inc.
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  16. Jensen, Gerald R. & Solberg, Donald P. & Zorn, Thomas S., 1992. "Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(02), pages 247-263, June.
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