Analysis of dividend policy of dual and single class U.S corporations

Amoako‐Adu, Ben; Baulkaran, Vishaal; Smith, Brian F.

doi:10.1016/j.jeconbus.2013.10.002

Cited by 14 publications

(10 citation statements)

References 45 publications

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“…Finally, our paper is the first one to examine corporate payouts in dual-class firms separating the superior share classes from the inferior share classes. Our results extend Jordan et al (2014) and Amoako-Adu et al (2014), both of which also examine the payouts of dual-class firms but without separating their superior and inferior share classes.…”

Section: Introductionsupporting

confidence: 70%

“…They argue for the support of the pre-commitment hypothesis that dual-class firms pay out more to reduce agency costs. Amoako-Adu et al (2014) use a sample of closely controlled (i.e., 15 percent of the votes is held by an individual, a family or an institution) dual-class firms and matched single-class firms in S&P 1500 from 2001 to 2007. They find that dual-class firms have lower cash dividend payments and lower total payouts than single-class firms, also without separating the superior voting shares and the inferior voting shares of dual-class firms.…”

Section: Related Literaturementioning

confidence: 99%

“…The mixed results in Jordan et al (2014) and Amoako-Adu et al (2014) may come from several sources. For instance, the different sample periods, the different samples and whether the dual-class firms are closely controlled.…”

Section: Related Literaturementioning

confidence: 99%

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Corporate payouts in dual classes

Lei

2019

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Purpose The purpose of this paper is to examine the dividend payments and share repurchases of dual-class firms that have both their superior voting shares and inferior voting shares publicly traded. Design/methodology/approach This paper uses matched dual-class and single-class samples from 1994 to 2015 and logit models to evaluate the likelihoods of dividend payment and share repurchase between dual-class firms and single-class firms. Findings The results show that dual-class firms are more likely than the matched sample of single-class firms to pay dividends in both share classes. Dual-class firms, however, are more likely to repurchase their superior shares than single-class firms and their inferior shares. Research limitations/implications The results suggest that dual-class firms do not use corporate payouts to either mitigate agency problems or maintain the private benefits of control. Instead, dual-class firms use dividend payments to mitigate agency problems while using repurchases of superior shares to maintain the private benefits of control, which supports the agency payout hypothesis. Practical implications This paper highlights the differences between dividend payments and share repurchases as forms of corporate payouts and suggests that firms may choose a particular form for a particular purpose. Originality/value This paper provides the first piece of empirical evidence on the corporate payouts of dual-class firms separating their superior voting shares and inferior voting shares.

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Section: Introductionsupporting

confidence: 70%

Section: Related Literaturementioning

confidence: 99%

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Corporate payouts in dual classes

Lei

2019

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“…This study is the first in the dividend literature in a weak investor protection setting to precisely decompose the control-ownership wedge into a pyramid wedge and a dual share wedge to differentiate their respective effects on dividend payouts. Studies tend to use dummy variables instead of quantifying pyramid and dual share CEMs (e.g., Pindado et al, 2012;Amoako-Adu, Baulkaran, & Smith, 2014;González, Guzmán, Pombo, & Trujillo, 2014).…”

Section: Introductionmentioning

confidence: 99%

Dividend Payouts: Majority Control and Rent Extraction

Besim

Adaoglu

2018

Journal of Business Economics and Management

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In Eurasia, Turkey has a “crony” capitalist system with majority control and business groups (BGs) in the hands of a few families. These business groups are often organised around a holding company. We analyse the dividend payouts of family controlled Borsa Istanbul companies, which are affiliated to holding and non-holding BGs. We investigate and quantify the effects of several control-enhancing mechanisms (CEMs) on dividend payouts. We use precise quantitative proxies for CEMs to measure the divergence between control and ownership rights. Supporting the rent extraction hypothesis, holding business group companies have lower dividend payouts as the divergence between control and ownership rights widens and the pyramid wedge increases. However, controlling foreign-family coalitions in holding business group companies curb the rent extraction problem by having a positive effect on the dividend payouts. Overall, for family controlled holding BG companies, the effects of company-specific financial control variables on dividend payouts are stronger than the effects of CEMs. For family controlled non-holding BG companies, there is no empirical support for either the rent extraction or the reputation building hypotheses. The company-specific financial control variables are the main determinants of dividend payouts for family controlled non-holding BG companies.

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“…14 Results indicate that NAME, MEDIA , and SALESRANK ( SALES/REGIONSALES ) are significantly positively (negatively) associated with the probability of choosing a dual-class structure. 15 Following Amoako-Adu, Baulkaran, and Smith (2014) and McGuire, Wang, and Wilson (2014), we use the coefficient estimates from Equation (2) to construct an inverse Mills ratio ( INV_MILL ; Heckman, 1979), which we include as a control for sample-selection bias in Equation (1).…”

Section: Data and Research Methodologymentioning

confidence: 99%

Insider Ownership and Financial Analysts’ Information Environment: Evidence From Dual-Class Firms

Forst

Hettler

Barniv

2016

Journal of Accounting, Auditing & Finance

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We examine the association of insider ownership with financial analysts’ forecast accuracy and dispersion in a sample of U.S. dual-class firms. Insider ownership exerts two effects: a positive incentive effect and a negative entrenchment effect. The lack of significant findings in prior research regarding the association between insider ownership and forecast accuracy may be attributable to the offsetting forces of these two effects. Using a comprehensive hand-collected sample of U.S. firms that maintain more than one class of common stock, we are able to disentangle incentive and entrenchment effects which are confounded in single-class firms. We find that disproportionate insider control is negatively associated with forecast accuracy and positively associated with forecast dispersion. Moreover, insider cash flow rights (insider voting rights) are positively (negatively) associated with forecast accuracy and negatively (positively) associated with forecast dispersion, consistent with incentive-alignment and entrenchment effects of ownership affecting financial analysts’ forecasting environment in opposite directions.

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Analysis of dividend policy of dual and single class U.S corporations

Cited by 14 publications

References 45 publications

Corporate payouts in dual classes

Corporate payouts in dual classes

Dividend Payouts: Majority Control and Rent Extraction

Insider Ownership and Financial Analysts’ Information Environment: Evidence From Dual-Class Firms

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