Why Do Privatized Firms Pay Higher Dividends?

52 Pages Posted: 19 Sep 2018 Last revised: 26 Jun 2019

See all articles by Abhinav Goyal

Abhinav Goyal

University College Cork

Shrikant P. Jategaonkar

Southern Illinois University at Edwardsville - Department of Economics

Cal B. Muckley

University College Dublin

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2019

Abstract

We examine state income and reputation incentives to account for the high dividends of privatized firms. Consistent with these agency-cost based incentives, we show that the extent of state ownership positively impacts corporate dividends. We distinguish between the empirical importance of these incentives using variation in the rule of law to protect minority shareholders, the fiscal deficit and the political orientation of the state. Our findings show that an incentive to enhance the state's reputation with minority shareholders can account for the high dividends of privatized firms.

Keywords: Privatization, State ownership, Payout policy, Dividends, Minority shareholders, State income, State reputation

JEL Classification: G35, L33, L25

Suggested Citation

Goyal, Abhinav and Jategaonkar, Shrikant P. and Muckley, Cal B., Why Do Privatized Firms Pay Higher Dividends? (June 1, 2019). Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 18-10, Available at SSRN: https://ssrn.com/abstract=3251812 or http://dx.doi.org/10.2139/ssrn.3251812

Abhinav Goyal

University College Cork ( email )

O'Rahilly Building
College Road
Cork
Ireland
+353 (0)21 490 2839 (Phone)

Shrikant P. Jategaonkar

Southern Illinois University at Edwardsville - Department of Economics ( email )

Edwardsville, IL 62026-1102
United States

Cal B. Muckley (Contact Author)

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

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