Spillover Effect of Annual General Meeting on Dividend Payout in Family Businesses

Abstract

The recent family business literature considers the heterogeneity of ownership and categorize them into lone founder owners and family owners. The distinct social behavior of both type of owners lead to different dividend payout decisions. This study provides novel evidence by examining the effect of lone founders and family owners on dividend payout decisions, and spill over effect of annual general meeting on this relationship. We employed 4567 firm year observations of the non-financial firms listed on Pakistan Stock exchange over the period 2006-2021 and used multivariate regression analysis to test the hypotheses. For robustness check, we employed generalized method of moments estimation and two stage least squares regression and confirmed the earlier obtained results. Our findings indicate that firms under lone founders’ ownership prefer long term growth strategies and therefore pay lower dividends whereas the family owners distribute higher dividend to increase family’s wealth. Moreover, we found that family owners schedule annual general meeting promptly as compared to the lone founders to distribute the dividend at the earliest. Overall, our results support the concept of organizational identity in lone founder ownership and family identity in family ownership.