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Foreign Corporate Ownership and Dividends

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  • Chai, D.H.

Abstract

This paper investigates the relatively unexplored relationship between dividends and ownership structure in an emerging market setting. Using a unique panel dataset of foreign ownership and firm attributes of listed Korean firms, we first characterize foreign ownership after the full capital market liberalization in 1998. Foreign investors in Korea tend to overweight larger and profitable firms with large export sales and underweight highly leveraged firms with low market-to-book ratio. Then we explore the effects of the rise in foreign ownership on dividend policies in Korea. Firms make higher dividend payouts as the shareholdings of foreigners increase. This result is consistent with the agency theory view of dividends, i.e. dividends can substitute for direct monitoring of firms by large external shareholders. .

Suggested Citation

  • Chai, D.H., 2010. "Foreign Corporate Ownership and Dividends," Working Papers wp401, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp401
    Note: PRO-2
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    1. repec:nax:conyad:v:62:y:2017:i:4:p:1183-1198 is not listed on IDEAS
    2. repec:vul:omefvu:v:8:y:2017:i:1:id:218 is not listed on IDEAS
    3. 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.
    4. repec:nax:conyad:v:62:y:2017:i:4:p:1199-1213 is not listed on IDEAS

    More about this item

    Keywords

    Corporate Governance; Institutional Ownership; Dividends.;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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