Corporate governance in Taiwan: The nonmonotonic relationship between family ownership and dividend policy |
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Authors: | Yuting Huang Anlin Chen and Lanfeng Kao |
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Institution: | (1) Department of Business Management, National Sun Yat-sen University, Kaohsiung, Taiwan;(2) Department of Finance, National University of Kaohsiung, Kaohsiung, Taiwan |
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Abstract: | This study considers an important aspect of corporate governance: the relationship between cash flow rights and dividend payout
policy of listed family firms in Taiwan, an economy characterized by a predominance of family-controlled firms. Dividend payout
levels are important because they are crucial to governing the firm and managing its investments. The empirical results show
that at a low level of controlling families’ cash flow rights, the threat to lose control at any time makes controlling families
claim more in dividends. This yields a positive relationship between dividend payout and the cash flow rights of controlling
families at this level. Meanwhile, at a moderate level of controlling families’ cash flow rights, the entrenchment effect
becomes more robust and creates a negative relationship with dividend payout. Finally, at the very highest level of controlling
families’ cash flow rights, excessive firm-specific risk again helps to again create a positive relationship. This nonmonotonic
relationship between controlling family cash flow rights and dividend payout also holds for financially mature firms that
have a high earned to contributed capital mix. |
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Keywords: | |
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