Largest shareholder and dividend policy around the world

This paper examines the interaction between the largest shareholder and dividend policy in a sample of 8,279 listed firms drawn from 37 countries. We find that firms are more likely to pay dividends when profitability is high, debt is low, investment opportunities are limited or when the largest shareholder is not an insider. Further, the magnitude of dividend payout tends to be smaller when the largest shareholder is either an insider or a financial institution. It is also apparent that largest shareholding and dividend payout are related and that, consistent with the extant literature, legal system does matter in dividend policy decisions. Crown Copyright (C) 2007 Published by Elsevier B.V. All rights reserved.