Abstract
This study investigates the relationship between the level of shareholdings and identities of the largest shareholders, and cash dividend policy. The study is conducted with a sample of 180 firms listed on Vietnam stock exchange markets from 2009 to 2013. The fixed effect model is employed to analyze the balanced panel data. The results show that the higher the level of holdings by the largest shareholders, the lower the dividend payout. Moreover, companies with the State and Foreign investors as the largest shareholders have higher dividend payout ratio than companies with local investors and managers as the largest shareholders. The study also finds that companies tend to pay higher dividends when profits decrease or growth opportunities increase.
Highlights
Privatization has been proven to be a successful approach for remarkable developments in emerging countries with deep State involvement (World Bank, 1995)
In the weak governance context of Vietnam, it is expected that foreign largest shareholders may prefer higher payouts than local largest shareholders. e second hypothesis is established: H2: ere is di erential impact of identities of the largest shareholders on dividend payout ratio
Data were collected from 2009 to 2013 and organized into a balanced panel. e nonprobability sampling method is applied. e sample is comprised of companies listed on two well-recognized stock exchanges in Vietnam, which are Ho Chi Minh City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX). e rms were all state-owned enterprises (SOEs) before listing, i.e. listed rms which were not SOEs before being listed are excluded
Summary
Privatization has been proven to be a successful approach for remarkable developments in emerging countries with deep State involvement (World Bank, 1995). The negative relationship between high level of shareholdings and dividend payout is documented (e.g., Maury & Pajuste, 2002; Gugler & Yutoglu, 2003; Harada & Nguyen, 2006; Bena & Hanousek, 2008) They may force managers to use free cash ows to make investment decisions with the companies they own even though returns on these investments are not desirable. The e ect of shareholdings of the largest shareholder on dividend payouts is mainly considered from both monitoring and tunneling dimensions (Dyck & Zingales, 2004): (1) the largest shareholder may act on the interest of other shareholders and prevent managers from self- dealing conducts as suggested by the monitoring hypothesis (Harada & Nguyen, 2011; Amidu & Abor, 2006; Al-Malkawi et al, 2010; Ramli, 2010; Al-Najjar & Hussainey, 2011; anatawee, 2013, 2014), or (2) they may force managers to make decisions to expropriate resources of rms for private bene ts that are not shared by minority shareholders (Maury & Pajuste, 2002; Gugler & Yutoglu, 2003; Bena & Hanousek, 2008). Based on widely documented tunneling behavior of the largest shareholder in the institutional context of weak corporate governance, the ownership held by the largest shareholder is speculated to have a negative in uence on dividend payout policy as the result of the low minority shareholder protection (La porta et al, 2000). e rst hypothesis is established: H1: ere is negative relationship between percentage of shareholdings of the largest shareholder and the dividend payout ratio
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