The Link between Dividend Policy and Institutional Ownership

Journal of Corporate Finance, Vol. 8, pp. 105–122, 2002

18 Pages Posted: 24 Mar 2011

See all articles by Helen Short

Helen Short

University of Leeds - Division of Accounting and Finance

Hao Zhang

University of Macau - Faculty of Business Administration

Kevin Keasey

University of Leeds - Division of Accounting and Finance

Date Written: 2002

Abstract

This paper examines the relatively neglected link between dividend policy and institutional ownership. It is also the first example of using well-established dividend payout models to examine the potential association between ownership structures and dividend policy. Moreover, the paper presents the first results for the UK, where the institutional framework and ownership structures are different from those of the US.

Using a UK panel data set, the role of institutional ownership in association to dividend payout ratios is analysed within the context of the dividend models of Lintner [American Economic Review, 46 (1956) 97], Waud [Journal of the American Statistical Association, 1996] and Fama and Babiak [Journal of the American Statistical Association, 63 (1968) 1132]. The results consistently produce strong support for the hypothesis that a positive association exists between dividend payout policy and institutional ownership. Furthermore, the results for an earnings trend model suggest a positive earnings trend component to the association between institutional ownership and the dividend payout ratio. In addition, there is some evidence in support of the hypothesis that a negative association exists between dividend payout policy and managerial ownership.

Keywords: Dividend policy, Institutional ownership

JEL Classification: G32

Suggested Citation

Short, Helen and Zhang, Hao and Keasey, Kevin, The Link between Dividend Policy and Institutional Ownership (2002). Journal of Corporate Finance, Vol. 8, pp. 105–122, 2002, Available at SSRN: https://ssrn.com/abstract=1788849

Helen Short

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

Hao Zhang (Contact Author)

University of Macau - Faculty of Business Administration ( email )

Macau

Kevin Keasey

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 2618 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,523
Abstract Views
5,826
rank
14,753
PlumX Metrics