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Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic

  • Jan Hanousek
  • Jan Bena

    ()

Using cross-sectional analysis of corporate dividend policy we show that large shareholders extract rents from forms and expropiate minority shareholders in the weak corporate governance environment of an emerging economy. By comprising divideneds paid across varying corporate ownership structures- concentration, type, and domicile of ownership - we quantify these effects and reveal that they are substantial. We find that the target payout ratio for firms with majotiry ownership is low but that the prescence of a significant minority shareholder increases the target payout ratio and hence precludes a majority owner from extracting rent. In contrast to other studies from developed markets, our unique dataset from teh Czech Republic for the period 1996-2003 permits us to take account of teh endogencity of ownership.

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Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp556.

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Date of creation: Mar 2006
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Handle: RePEc:fmg:fmgdps:dp556
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