We find that, at low levels of insider ownership, the market's reaction to dividend increases becomes less positive, and to dividend decreases becomes less negative, as insider ownership increases. The price reaction is larger when insiders control voting on shares they do not own and lower if a family owns a block. The results are .stronger for firms with low values of Tobin's Q. Several tests indicate that these cross-sectional results are not a manifestation of the information content hypothesis. Instead, the findings support the hypothesis that dividend increases reduce the agency costs of free cash flow and vice versa.
Bajaj, M., Vijh, A. and Westerfield, R. (2002), "Ownership structure, agency costs and dividend policy", Research in Finance (Research in Finance, Vol. 19), Emerald Group Publishing Limited, Bingley, pp. 1-28. https://doi.org/10.1016/S0196-3821(02)19002-2Download as .RIS
Emerald Group Publishing Limited
Copyright © 2002, Emerald Group Publishing Limited