Abstract
The system of proxy solicitation is designed to alleviate the agency cost. The cash dividend policy involves the agency problem, which is particularly important in the banking sector. This study examines how proxy solicitation and ownership structure affect bank cash dividends. We find proxy solicitation is positively correlated with dividends, while the interactions between proxy solicitation and ownership structure negatively affect dividends. These results imply proxy statements display shareholder activism to some extent. However, when banks with high CEO, director, and government ownership solicit proxies as a means to smoothly reduce dividends, proxy solicitation becomes inefficient in shareholder activism.
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