Abstract
Ownership structure is an influential factor on firm policies. One of these policies is dividend policy. Therefore, a significant relationship between ownership structure and dividend policy is expected. This paper examined the relationship between dividend policy and ownership structure in Tehran Stock Exchange from 2000 to 2007. In this study, four regression models were used. Institutional ownership was negatively associated with dividend payout. It indicated that the presence of institutional investors results in less usage from dividend as a signal for good corporate performance. Moreover, positive relationship was founded between dividend payout and concentrated institutional ownership. However, there was not a significant relationship between managerial ownership and dividend payout. Key words: Ownership structure, institutional ownership, concentrated institutional ownership, managerial ownership, dividend policy.
Highlights
Dividend policy is one of the important components of firm policies and has been viewed as an interesting issue in the literature
Positive relationship was founded between dividend payout and concentrated institutional ownership
Where; D: the total amount of ordinary dividends related to the accounting year; E: net profit derived from normal trading activities after depreciation and other operating provisions; INST: the percentage of equity held by institutions at the beginning of the accounting year; CONC: the sum of square of institutions ownership percentage at the beginning of the accounting year; M: total percentage of equity owned by directors at the beginning of the accounting year; SIZE: natural logarithm of total assets; LEV: longterm debts to total assets; market-tobook value (MTBV): market to book value of stockholders equity; free cash flow (FCF): capital expenditures minus operating cash flow; ε: error term
Summary
Dividend policy is one of the important components of firm policies and has been viewed as an interesting issue in the literature. Dividend payout decisions affect on the firms valuation. The main problem is the reasons for adopting a policy of divided payout. One of these factors is corporate governance. The corporate environmental characteristics affect corporate governance practices. Corporate governance changes simultaneously with the environmental changes. Corporate governance changes have been common in countries with relatively high level of institutional ownership and managerial ownership. These investors play a key role in prompting change in many corporate governance systems (Gillan and Starks, 2003). Gillan and Starks (1998) argued that corporate governance changes, including ownership structure, are responses to environmental characteristics changes. These investors play a key role in prompting change in many corporate governance systems (Gillan and Starks, 2003). Gillan and Starks (1998) argued that corporate governance changes, including ownership structure, are responses to environmental characteristics changes. Claessens et al (2000) show that corporate governance and investors and creditors protections are stronger in developed markets, as opposed to emerging markets like Iran
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