Lee, King Fuei (2010): Retail Minority Shareholders and Corporate Reputation as Determinant of Dividend Policy in Australia. Forthcoming in: Pacific-Basin Finance Journal , Vol. 18, No. 4 (September 2010): pp. 351-368.
Download (224Kb) | Preview
This paper investigates the influence of retail minority shareholders in the determination of corporate dividend policies of Australian companies. While retail investors are typically also minority shareholders and therefore perceived in academic literature to have limited influence on corporate dividend decisions, casual empiricism suggests the contrary. We hypothesise that corporate reputation serves as a device aligning managers’ incentives with retail minority shareholder interests, and that the propensity to manage for corporate reputation is positively related to the degree of retail shareholder base. We find empirical evidence of managers of Australian companies catering to the retail investors’ preference for dividends when setting dividend policy, even when they are minority shareholders, so long as the proportion of these retail shareholders relative to the total shareholder base is high. Our results are robust when controlled for the factors of size, profitability, financial leverage, signalling, agency costs and franking credits.
|Item Type:||MPRA Paper|
|Original Title:||Retail Minority Shareholders and Corporate Reputation as Determinant of Dividend Policy in Australia|
|Keywords:||Dividend policy, retail shareholders, minority shareholders, Australia, catering theory, corporate reputation|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G35 - Payout Policy|
|Depositing User:||King Fuei Lee|
|Date Deposited:||04. Jun 2010 20:11|
|Last Modified:||13. Feb 2013 16:03|
Abrutyn, S. and Turner, R., 1990. Taxes and Firm's Dividend Policies: Survey Results”, National Tax Journal 43, 491-496.
Allen, F. and Michaely, R., 2003. Payout policy in: Constantinides, G., Harris, M., and Stulz, R. (Eds.) Handbook of Economics and Finance, Elsevier – North Holland, Amsterdam, 337-429.
Allen, F., Bernardo, A. and Welch, I., 2000. A Theory of Dividends Based on Tax Clienteles, Journal of Finance 55, 2499-2536.
Anderson, G.J., 1986. An Application of the Tobit Model to Panel Data: Modelling Dividend Behaviour in Canada, MacMaster University Working Paper.
Australian Stock Exchange, 2006. 2006 ASX Share Ownership Study, Available at http://www.asx.com.au/about/pdf/2006_australian_share_ownership_study.pdf
Australian Stock Exchange, 2008. 2008 ASX Share Ownership Study, Available at http://www.asx.com.au/about/pdf/2008_australian_share_ownership_study.pdf
Baker, H.K., Dutta, S., and Saadi, S., 2008. How Managers of Financial versus Non-Financial Firms View Dividends: The Canadian Evidence, Global Finance Journal 19, 171-186
Baker, M. and Wurgler, J., 2004. A Catering Theory of Dividends, Journal of Finance 59, 1125-1165.
Bebczuk, R., 2007. Corporate Governance, Ownership and Dividend Policies in Argentina, in Investor Protection and Corporate Governance: Firm-Level Evidence Across Latin America, Ed. Chong, A. and Lopez-de-Silanes, F., Stanford University Press, 157-211.
Bellamy, D., 1994. Evidence of Imputation Clienteles in the Australian Equity Market, Asia Pacific Journal of Management 11, 275-287.
Bloemer, J. and de Ruyter, K., 1998. Investigating Drivers of Bank Loyalty: The Complex Relationship Between Image, Service Quality, International Journal of Bank Marketing 16, 276-286.
Chan, K., McColough, D. and Skully, M., 1992. Do Dividend Reinvestment Plans Add Value? An Australian Empirical Study, University of New South Wales School of Banking and Finance Working Paper 43.
Chajet, C., 1997. Corporate Reputation and the Bottom Line, Corporate Reputation Review 1, 19-23. Comerton-Forde, C. and Rydge, J., 2006. Director Holdings, Shareholder Concentration and Illiquidity, University of Sydney School of Business Working Paper Series.
Dahlquist, M., Robertsson, G. and Rydqvist, K., 2006. Direct Evidence of Dividend Tax Clienteles, Centre for Economic Policy Research Discussion Paper No. 6005.
DeAngelo, H. and DeAngelo, L., 1990. Dividend Policy and Financial Distress: An Empirical Investigation of Troubled NYSE Firms, Journal of Finance 45, 1415-1431.
DeAngelo, H., DeAngelo, L. and Skinner, D., 1992. Dividends and Losses, Journal of Finance 47, 1837-1864. Deshmukh, S., 2003. Dividend Initiations and Asymmetric Information: A Hazard Model, The Financial Review 38, 351-368.
Dhaliwal, D., Erickson, M. and Trezevant, R., 1999. A Test of the Theory of Tax Clienteles for Dividend Policies, National Tax Journal 52, 179-194.
Fama, E. and French, K., 2001. Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay?, Journal of Financial Economics 60, 3-43.
Ferrisa, S., Jayaramanb, N. and Sabherwalc, S., 2009. Catering Effects in Corporate Dividend Policy: The International Evidence. Journal of Banking and Finance 33, 1730-1738.
Fombrun , C., 1996. Reputation , Harvard Business School Press, Boston .
French, K. and Poterba, J., 1991. Investor Diversification and International Equity Markets, American Economic Review 81(2), 222–226.
Grossman, S.J. and Hart, O.D., 1980. Takeover Bids, the Free-Rider Problem and the Theory of the Corporation, Bell Journal of Economics 11, 42-64.
Gupta, S., 2002. Strategic Dimensions of Corporate Social Responsibility As Sources of Competitive Advantage via Differentiation, Unpublished Doctoral Dissertation, Temple University USA.
Hammond , S .A. and Slocum, J.W., 1996. The Impact of Prior Firm Financial Performance on Subsequent Corporate Reputation, Journal of Business Ethics 15 , 159-165.
Hanson, D. and Ziegler, R., 1990. The Impact of Dividend Imputation on Firms' Financial Decisions, Accounting and Finance 30, 29-53.
Ho, H., 2003. Dividend Policies in Australia and Japan. International Advances in Economic Research 9, 91-100. Holder, E.M, Langrehr, W.F. and Hexter, L.J., 1998. Dividend Policy Determinants: An Investigations of Influence of stakeholder Theory, Financial Management 27(3), 73-82.
Huang, H.R., 2001. Bayesian Analysis of the Dividend Behaviour, Applied Financial Economics 11, 333-339.
Jensen, G, Solbery, D. and Zoun, T., 1992. Simultaneous Determination of Insider Ownership, Debt and Dividend Policies, Journal of Financial and Quantitative Analysis 27, 247-263.
Jensen, M.C., 1986. Agency Costs of Free Cash Flow, Corporate Finance and Takeovers, American Economic Review 76, 654-665.
Jensen, M.C., and Meckling, W.H., 1976. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, Journal of Financial Economics 3, 305−360.
Johnson, S. and Shleifer, A., 2004. Privatization and Corporate Governance. In Ito, T. and Krueger, A. (Ed.). Governance, Regulation and Privatization in the Asia-Pacific Region, NBER East Asia Seminar on Economics 12, 13-34.
Jun, A.L., Gallagher, D. and Partington, G., 2006. An Examination of Institutional Dividend Clienteles: Evidence from Australian Institutional Portfolio Holdings, University of New South Wales Australian School of Business Working Paper 2006-01.
Kalay, A., 1980. Signaling, Information Content, and the Reluctance to Cut Dividends, Journal of Financial and Quantitative Analysis 15(4), 855-869.
Keim, D.B., 1985. Dividend Yields and Stock Returns: Implications of Abnormal January Returns, Journal of Financial Economics 14, 473-489.
Kim, B. and Maddala, G., 1992. Estimation and Specification Analysis of Models of Dividend Behavior Based on Censored Panel Data, Empirical Economics 17, 111-124.
Kouki, M., 2009. Stock Options and Firm Dividend Policy: Evidence from Toronto Stock Exchange, International Research Journal of Finance and Economics, 25, 97-113.
Kowalewski, O., Stetsyuk, I. and Talavera, O., 2007. Corporate Governance and Dividend Policy in Poland, Wharton Financial Institutions Centre Working Paper No. 07-09.
La Porta, R., Lopez-De-Silanes, F., Shleifer, A. and Vishny, R.W., 2000. Agency Problems and Dividend Policies Around the World, Journal of Finance 55, 1-33.
Larsen, D., 2002. Determining the Relationship Between Investor Relations and Reputation, 6th International Conference on Corporate Reputation, Identity and Competitiveness, Boston.
Lewellen, W., Stanley, K., Lease, R. and Schlarbaum, G., 1978. Some Direct Evidence on the Dividend Clientele Phenomenon, Journal of Finance 33, 1385-1399.
Lin, C.T., 2002. Dividend Policies, Legal Regimes and Institutional Structures in the Asia Pacific Region. Edith Cowan University School of Finance and Business Economics Working Paper Series 0204.
Lintner, J., 1956. Distribution of Incomes of Corporations Among Dividends, Retained Earnings and Taxes, American Economic Review 46, 97-113.
Lipson, M., Macquieira, C. and Megginson, W., 1998, Dividend Initiation and. Earnings Surprises, Financial Management 27, 36-45.
Little, P. and Little, B.L., 2000. Do Perceptions of Corporate Social Responsibility Contribute to Explaining Differences in Corporate Price-Earnings Ratios? A Research Note, Corporate Reputation Review 3, 137-142.
Martensen, A., Grønholdt, L. and Kristensen, K., 2000. The Drivers of Customer Satisfaction and Loyalty: Cross-industry Findings from Denmark, Total Quality Management 11, 544-553.
Modigliani, F. and Miller, M., 1961. Dividend Policy, Growth, and the Valuation of Shares, Journal of Business XXXIV, 235-64.
Nguyen, N. and Leblanc, G., 2001. Corporate Image and Corporate Reputation in Customers’ Retention Decision in Services, Journal of Retailing and Consumer Services 8, 227-236.
Pattenden, K. and Twite, G., 2008. Taxes and Dividend Policy under Alternative Tax Regimes. Journal of Corporate Finance 14, 1-16.
Perez-Gonzalez, F., 2003. Large Shareholders and Dividends: Evidence from U.S. Tax Reforms. Columbia University Graduate School of Business Working Paper Series.
Pettit, R., 1977. Taxes, Transactions costs and the Clientele Effect of Dividends, Journal of Financial Economics 5, 419-436.
PriceWaterhouseCoopers, 2009. Worldwide Real Estate Investment Trusts (REIT) Regimes: Country Summaries, Available at http://www.pwc.com/gx/en/investment-management-real-estate/pdf/worldwide-reit-regimes.pdf
Richardson, G., Sefcik, S. and Thompson, R., 1986. A Test of Dividend Irrelevance Using Volume Reactions to a Change in Dividend Policy, Journal of Financial Economics 17, 313–333.
Roberts, P.W. and Dowling, G.R., 2002. Corporate Reputation and Sustained Financial Performance, Strategic Management Journal 23, 1077-1093.
Rozeff, M., 1982. Growth, Beta and Agency Costs as Determinants of Dividend Payout Ratios, Journal of Financial Research 5, 249-259.
Scholz, J.K., 1992. A Direct Examination of the Dividend Clientele Hypothesis, Journal of Public Economics 49, 261-285.
Shefrin, H. and Statman, M., 1995. Making Sense of Beta, Size, and Book-to-Market, The Journal of Portfolio Management 21, 26-34.
Shleifer, A. and Vishny, R.W., 1986. Large Shareholders and Corporate Control, Journal of Political Economy 94, 461-88. Smith, Jr., C.W and Watts, R., 1992. The Investment Opportunity Set and Corporate Financing, Dividend and Compensation Policies, Journal of Financial Economics 32, 263-292.
Srivastava, R.K., McInnish, T.H., Wood, R.A. and Capraro, A.J., 1997. The Value of Corporate Reputation: Evidence From the Equity Markets, Corporate Reputation Review 1, 62-68 .
Wilson, S., 2009. Retail Investors Have Stock Clout: Brand Damage, The Australian 28 October 2009.