Abstract
This study examines the impact of family control on the dividend policy of firms in Pakistan, covering the period from 2009 to 2016. It also investigates whether family control moderates the impact of firm-specific factors on the dividend policy. The GMM model for panel data estimation is used. The mean difference univariate analysis shows that family firms differ from nonfamily firms based on financial characteristics. The multivariate analysis shows that family firms pay lower dividends than nonfamily firms. Besides, firm size inversely affects the dividend policy, whereas tangibility positively affects it. Moreover, family control does not moderate the impact of all firm-specific factors on the dividend policy. Overall, family control, size, and tangibility are found to be the main determinants of the dividend policy in Pakistan.
Highlights
This study examines the impact of family control on the dividend policy of firms in Pakistan, covering the period from 2009 to 2016
Such firms should pay more dividends compared with nonfamily firms to overcome agency problems and reduce agency
We find that the difference between the dividends of family and nonfamily firms is statistically significant at the 1% level
Summary
This study examines the impact of family control on the dividend policy of firms in Pakistan, covering the period from 2009 to 2016. Corporate governance only modestly provides a mechanism through which outside investors can protect themselves against expropriation by insiders It is mostly associated with the presence of agency problems, which can arise when there is a separation of control and ownership in a firm. Extant research on finance contends that family firms often expropriate the wealth of minority shareholders (De Cesari, 2012). Such firms should pay more dividends compared with nonfamily firms to overcome agency problems and reduce agency (2019) 5:42 costs. These firms conventionally offer more benefit to family members (majority shareholders)
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