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Ownership Structure and Dividend Policies: Evidence from Iran

Aboutalebi Hosseini, Reihaneh | 2024

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 57902 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Ebrahimnejad, Ali
  7. Abstract:
  8. Ownership concentration and the separation of voting rights from cash flow rights are common in countries with weak legal protections for minority shareholders. These characteristics shift the agency problem from conflict of interests between managers and shareholders to conflict of interests between majority and minority shareholders. In such ownership structures, majority shareholders receive dividends based on their cash flow rights but exert control over the company according to their voting rights. Consequently, they have both the motivation and the ability to withhold profit distribution among minority shareholders and prioritize their own interests. Iran, as a country characterized by concentrated ownership and complex ownership arrangements, is susceptible to the expropriation of minority shareholders by controlling owners. This research aims to investigate the impact of ownership structure on dividend payout ratios. We analyze a sample of 4,003 firm-year observations from 560 companies during the period from 1390 to 1400. Our empirical analysis, using the Tobit regression model, reveals that an increase in concentration in the first ownership layer leads to a higher dividend payout ratio. Furthermore, examining all layers of ownership structure at the 20% ownership threshold demonstrates that as the voting rights of the largest ultimate owner increase, a greater proportion of the company’s profits is distributed as dividends. Furthermore, a decrease in the ratio of cash flow rights to voting rights corresponds to an increase in the dividend payout ratio. Interestingly, our findings do not support the hypothesis of expropriation and abuse of minority shareholders by majority shareholders through dividend distributions. Instead, they align with a model emphasizing the mitigation of conflicts of interest. Moreover, at the 20% ownership threshold, an increase in the voting rights of the second ultimate owner and a narrowing gap between the voting rights of the first and second ultimate owners result in a higher payout ratio. The results also indicate that an increase in the voting rights of the second ultimate owner and a decrease in the voting rights gap between the first and second ultimate owners have no significant effect on the dividend payout ratio
  9. Keywords:
  10. Dividend ; Interests Conflict ; Expropriation ; Ownership Concentration ; Ultimate Owner ; Dividend Policy ; Stock Market

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