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Why do privatized firms pay higher dividends?
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Date
2019-09-05
Authors
Goyal, Abhinav
Jategaonkar, Shrikant
Muckley, Cal B.
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Published Version
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 strong and robust evidence that the extent of state ownership is positively related to 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.
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Keywords
Dividends , Minority shareholders , Payout policy , Privatization , State income , State ownership , State reputation
Citation
Goyal, A., Jategaonkar, S. P. and Muckley, C. B. (2020) 'Why do privatized firms pay higher dividends?', Journal of Corporate Finance, 60, 101493 (19 pp). doi: 10.1016/j.jcorpfin.2019.101493