An impact of the first and second-largest shareholders on a catering effect: evidence from Poland
DOI:
https://doi.org/10.12775/EiP.2021.021Keywords
dividend pay-out, catering theory of dividends, catering effect, agency theory, ownership concentrationAbstract
Motivation: Dividend pay-out is a frequently undertaken research issue. However, there is no study on the impact of concentrated ownership on adjustment of dividend amount to investor sentiment for pay-outs. The paper contribute to the literature by filling the research gap regarding the catering effect in the context of principal-principal agency conflict and type II agency costs, monitoring hypothesis and expropriation hypothesis.
Aim: The aim of the article is to investigate an impact of the first and second-largest shareholders on an adjustment of dividend pay-outs to investor sentiment for dividends. To achieve the aim, two hypotheses have been formulated, i.e. H1: if the first-largest shareholder is a strategic investor, a catering effect weakens; H2: an existence of significant second-largest shareholder moderates the extent to which companies cater to investor sentiment for dividends.
Results: There are three main finding: 1) the number of shares held by the first-largest shareholder is lower in dividend payers, while the number of shares held by the second-largest shareholder is lower in dividend non-payers; 2) listed companies from electromechanical industry sector cater to investor sentiment for dividends; 3) both research hypotheses have not been satisfied.
References
Aluchna, M., Berent, T., & Kamiński, B. (2019). Dividend payouts and shareholder structure: evidence from the Warsaw Stock Exchange. Eastern European Economics, 57(3), 227–250. https://doi.org/10.1080/00128775.2019.1568196.
Baker, M., & Wurgler, J. (2004a). A catering theory of dividends. The Journal of Finance, 59(3), 1125–1165. https://doi.org/10.1111/j.1540-6261.2004.00658.x.
Baker, M., & Wurgler, J. (2004b). Appearing and disappearing dividends: the link to catering incentives. Journal of Financial Economics, 73(2), 271–288. https://doi.org/10.1016/j.jfineco.2003.08.001.
Bałtowski, M. (2017). Więcej władzy niż własności: Skarb Państwa jako szczególny inwestor na GPW w Warszawie. Economic Studies, 1(92), 27–45.
Basse, T. (2013). Effects of inflation on dividend payments: an empirical study of public companies in Hungary. International Journal of Management, 30(1), 262–271.
Batabyal, S., & Robinson, R. (2017). Capital change and stability when dividends convey signals. Quarterly Review of Economics & Finance, 65, 158–167. https://doi.org/10.1016/j.qref.2016.08.009.
Bena, J., & Hanousek, J. (2008). Rent extraction by large shareholders: evidence using dividend policy in the Czech Republic. Czech Journal of Economics and Finance, 58(3–4), 106–130.
Bhattacharya, S. (1979). Imperfect information, dividend policy, and “the bird in the hand” fallacy. The Bell Journal of Economics, 10(1), 259–270. https://doi.org/10.2307/3003330.
Black, F., & Scholes, M. (1974). The effects of dividend policy on common stock prices and returns. Journal of Financial Economics, 1(1), 1–22. https://doi.org/10.1016/0304-405X(74)90006-3.
Damodaran, A. (2007). Finanse korporacyjne: teoria i praktyka. Helion.
DeAngelo, H., & DeAngelo, L. (2006). The irrelevance of the MM dividend irrelevance theorem. Journal of Financial Economics, 79(2), 293–315. https://doi.org/10.1086/261385.
Djebali, R., & Belanes, A. (2015). On the impact of family versus institutional blockholders on dividend policy. Journal of Applied Business Research, 31(4), 1329–1342. https://doi.org/10.19030/jabr.v31i4.9320.
Easterbrook, F.H. (1984). Two agency-cost explanations of dividends. The American Economic Review, 74(4), 650–659.
Eije, H., & Megginson, W.E. (2008). Dividends and share repurchases in the European Union. Journal of Financial Economics, 89(2), 347–374. https://doi.org/10.1016/j.jfineco.2007.11.002.
Fama, E.F., & Jensen, M.C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325. https://doi.org/10.1086/467037.
Gajdka, J. (2013). Cateringowe podejście do polityki dywidendy w warunkach polskiego rynku kapitałowego. Zarządzanie i Finanse, 2(4), 153–165.
Gugler, K., & Yurtoglu, B. (2003). Corporate governance and dividend pay-out policy in Germany. European Economic Review, 47(4), 731–758. https://doi.org/10.1016/s0014-2921(02)00291-x.
Harakeh, M., Lee, E., & Walker, M. (2019). The effect of information shocks on dividend payout and dividend value relevance. International Review of Financial Analysis, 61, 82–96. https://doi.org/10.1016/j.irfa.2018.10.009.
Jensen, M., & Meckling, W. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. The Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X.
John, K., & Williams, J. (1985). Dividend, dilution and taxes: a signaling equilibrium. The Journal of Finance, 40(4), 1053–1070. https://doi.org/10.2307/2328394.
Khan, T. (2006). Company dividends and ownership structure: evidence from UK panel data. Economic Journal, 116(510), 172–189. https://doi.org/10.1111/j.1468-0297.2006.01082.x.
Kowerski, M. (2011). Ekonomiczne uwarunkowania decyzji o wypłatach dywidend przez spółki publiczne. Konsorcjum Akademickie.
Li, W., & Lie, E. (2006). Dividend changes and catering incentives. Journal of Financial Economics, 80(2), 293–308. https://doi.org/10.1016/j.jfineco.2005.03.005.
Lintner, J. (1956). Distribution of income of corporations among dividends, retained earnings and taxes. American Economic Review, 46(2), 97–113.
López-Iturriaga, F., & Santana-Martín, D. (2015). Do shareholder coalitions modify the dominant owner’s control: the impact on dividend policy. Corporate Governance: An International Review, 23(6), 519–533. https://doi.org/10.1111/corg.12126.
Michaely, R., & Roberts, M.R. (2012). Corporate dividend policies: lessons from private firms. The Review of Financial Studies, 25(3), 711–746. https://doi.org/10.1093/rfs/hhr108.
Miller, M., & Modigiliani, F. (1961). Dividend policy, growth and the valuation of shares. Journal of Business, 34(4), 411–433. https://doi.org/10.1086/294442.
Neves, E.D. (2014). Ownership structure and investor’s sentiment for dividend. International Journal of Financial Research, 5(2), 35–58. https://doi.org/10.5430/ijfr.v5n2p35.
Notoria Serwis. (2021). Retrieved 15.09.2021 from https://ir.notoria.pl.
Pieloch-Babiarz, A. (2016). Reakcja rynku kapitałowego na wypłatę dywidendy inicjalnej w świetle cateringowej teorii dywidendy. Studia Ekonomiczne, 263, 88–102.
Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737–783.
Skinner, D. (2008). The evolving relation between earnings, dividends and stock repurchases. Journal of Financial Economics, 87(3), 582–609. https://doi.org/10.1016/j.jfineco.2007.05.003.
Stawasz-Grabowska, E., & Grabowski, W. (2018). Rynek obligacji skarbowych w strefie euro w okresie kryzysu. CeDeWu.
Tripathi, V. (2019). Agency theory, ownership structure and capital structure: an empirical investigation in the Indian automobile industry. Asia-Pacific Management Accounting Journal, 14(2), 1–22. http://dx.doi.org/10.24191/apmaj.v14i2.766.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Aleksandra Pieloch-Babiarz
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
Stats
Number of views and downloads: 658
Number of citations: 0
