Common ownership and firm dividend policies

Abstract

This paper examines the relationship between common owners and firm dividend policy. We find that dividend policies of firms newly added to an investor's portfolio evolve towards the dividend policies of the existing firms in this portfolio. This relationship is neither driven by owners targeting firms forecasted to change their dividend policies, nor by firms with a similar dividend strategy to the companies in the new investor's existing portfolio. Our results suggest that owners have a dividend policy style, and that their influence depends on the type of co-owner and the existing governance characteristics of the co-purchased firm.