The Relationship between Ownership Structure and Dividend Policy: An Application in Vietnam Stock Exchange

Abstract

This research examines the possible association between ownership structure and Vietnam listed companies’ dividend payout policy over the period of 2009 – 2015. We have investigated 642 listed firms in Hochiminh stock exchange and Hanoi stock exchange, using pannel data analysis. Ownership structure is described with two main sub-variables: ownership concentration and ownership composition. Specifically, the Herfindahl index (or H-index) was applied to measure the level of ownership concentration /dispersion for all major shareholders in the company, including the five biggest investors, corporate institutional investors, the ownership concentration level, and foreign investors. It has been observed that the H-index of all major shareholders has an average of less than 0.5 but the value of the H-index of institutional investors at 0.594 indicates that institutional investors are more likely to be concentrated in the hands of large institutional investors. The result showed linear relationship between institutional ownership and the dividend rate, but not statistically significant for the relationship between managerial ownership and dividend payout ratio.

Free Cash Flow in Moderated Capital Structure, Profitability, Institutional Ownership on Dividend Policy

“…To conclude both models, The hypothesis that institutional ownership had a positive effect on dividend policy was accepted. The result is equivalent to those (Jacob & Jijo Lukose, 2018;Setia et al, 2022;Trafalgar & Africa, 2019;Tran & Le, 2019;Widodo et al, 2021) studies. This result also strengthened the (Jensen & Meckling, 1976) theory that institutional ownership competency influenced firms' management in making decisions, especially dividends.…”

“…Trafalgar & Africa (2019) also stated institutional owners could learn about a firm's activities by adopting information to develop excellent performance of firms. Better knowledge of institutional ownership to make an outstanding performance is highly considered to stimulate dividend payment of the year (Tran & Le, 2019). The statement is aligned with (Widodo et al, 2021) that institutional ownership is a factor from the external party that participated in investing and affecting a firm's dividend policy.…”

“…After the announcement of the dividend distribution blast, management would calculate the number based on the share of ownership. Shareholders in this period were divided into managerial ownership, individual ownership, institutional ownership, foreign ownership and family ownership (Tran & Le, 2019). They said that every owner has their capability and authority in a firm.…”

How does ownership structure affect the financing and dividend decisions of firm?

“…Ownership concentration is also an important determinant of dividend policy. Anh and Tuan (2019) argue that Financing and dividend decisions of firm dividend payment policy is significantly affected by ownership concentration. Gugler and Yurtoglu (2003) and Khan (2006) report the negative impact of concentrated ownership on dividend payment policy.…”

Dividend Policy and Ownership Concentration: An Empirical Analysis of the Non-Financial Sector of Pakistan

“…Dividend Policy is one of the most controversial, unsolved puzzles and debated topics discussed in corporate finance (Brealey et al, 2008;Batool & Javid, 2014;Al-Najjar & Kilincarslan, 2019). There is a clear consensus among researchers on multiple factors that can determine dividend payouts, such as ownership concentration, that emerged in several studies conducted in different economies (Harada & Nguyen, 2011;Setiawan et al, 2016;Anh & Tuan, 2019). Further, different types of owners, subject to their identity, influence dividend policy differently.…”