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JOURNAL OF ACCOUNTING AND FINANCE
Dividend Policy and Institutional Ownership: Empirical Evidence
Using a Propensity Score Matching Estimator
Author(s): Julie Ann Elston, Richard Hofler, Junsoo Lee
Citation: Julie Ann Elston, Richard Hofler, Junsoo Lee, (2011) "Dividend Policy and Institutional Ownership: Empirical Evidence Using a Propensity Score Matching Estimator" Vol. 11, Iss. 1, pp. 89 - 102
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This study investigates the relationship between firm institutional ownership and dividend payout behavior in Germany. By applying propensity score matching (PSM) methods to address endogeneity problems, we avoid many of the econometric pitfalls of previous studies in the literature. Evidence suggests that neither institutional ownership nor bank control is significant in determining dividend payouts. Findings are consistent with stylized facts regarding the nature of the German institutional environment, which, through the rights of management to retain a significant percentage of net profits and lack of tax incentives, reduce the agency costs associated with conflicts between management and shareholder interests regarding use of the firm’s free cash flow.
