Article
The Effect of Institutional Ownership on Payout Policy: Evidence from Index Thresholds
Review of Financial Studies
(2016)
Abstract
We show that higher institutional ownership causes firms to pay more dividends. Our identification relies on a discontinuity in ownership around Russell index thresholds. Our estimates indicate that a one-percentage-point increase in institutional ownership causes a $7 million (8%) increase in dividends. We also find differences in shareholder proposals and voting patterns that suggest that even nonactivist institutions play an important role in monitoring firm behavior. The effect of institutional ownership on dividends is stronger for firms with higher expected agency costs.
Publication Date
June, 2016
DOI
10.2139/ssrn.2102822
Publisher Statement
Alan D. Crane, Sébastien Michenaud, James P. Weston, The Effect of Institutional Ownership on Payout Policy: Evidence from Index Thresholds, The Review of Financial Studies, Volume 29, Issue 6, June 2016, Pages 1377–1408, https://doi.org/10.1093/rfs/hhw012
Citation Information
Alan D. Crane, Sébastien Michenaud and James P. Weston. "The Effect of Institutional Ownership on Payout Policy: Evidence from Index Thresholds" Review of Financial Studies Vol. 29 Iss. 6 (2016) p. 1377 - 1408 ISSN: 0893-9454 Available at: http://works.bepress.com/sbastien-michenaud/3/