Abstract

This paper attempts to determine the relationship between the dividend policy of financial firms and a number of ownership and board control variables as well as two governance provisions—cumulative voting and staggered boards. Agency theory contends that dividends can be used as a substitute control device when ownership, board or governance provisions are unfavorable for shareholders. The evidence indicates that firms with lower CEO, institutional and hedge fund ownership pay higher dividends. Also, cumulative voting has a greater impact on dividend policy than staggered boards. These results suggest that firms adjust their dividend policy in response to control changes caused by ownership structure and governance provisions.

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