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Ownership, Dividends, R&D and Retained Earnings - are institutional owners short-term oriented?

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  • Wiberg, Daniel

    () (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

Abstract

This paper investigates the link between institutional ownership and dividend policy. Utilizing a dividend payout model, which accounts for earnings trends and partial adjustments of dividends, a positive but marginally diminishing relation is found between institutional ownership and dividends. This result holds when ownership is retained through the use of control enhancing mechanisms such as vote-differentiation, instruments that induce investors to demand higher payout ratios. A positive effect with respect to earnings is also recognized.By studying a panel of 189 Swedish firms, the paper presents the first evidence for the relationship between dividend payout policy and ownership in a corporate governance system which is characterized by an extensive separation of ownership from control. Most studies on the relationship between ownership and dividends have been made on US or UK data, which do not account for this Continental-European governance attribute. The paper supplements the literature by examining a unique database of ultimate ownership which makes it possible to account for ownership continuously.

Suggested Citation

  • Wiberg, Daniel, 2008. "Ownership, Dividends, R&D and Retained Earnings - are institutional owners short-term oriented?," Working Paper Series in Economics and Institutions of Innovation 152, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  • Handle: RePEc:hhs:cesisp:0152
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Edward L. Glaeser, Jed Kolko, and Albert Saiz, 2001. "Consumer city," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 27-50, January.
    3. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Economics of Governance, Springer, vol. 83(1), pages 197-228, October.
    4. Ottaviano, Gianmarco I.P. & Peri, Giovanni, 2005. "Cities and cultures," Journal of Urban Economics, Elsevier, vol. 58(2), pages 304-337, September.
    5. Edward L. Glaeser & Albert Saiz, 2003. "The rise of the skilled city," Working Papers 04-2, Federal Reserve Bank of Philadelphia.
    6. John M. Quigley, 1998. "Urban Diversity and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 127-138, Spring.
    7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Payout policy; institutions; ownership; corporate governance; panel data;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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