Dividends and Expropriation

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  • Mara Faccio
    Dipartimento di Scienze dell'Economia della Gestione Aziendale, Università Cattolica del Sacro Cuore, Largo Gemelli 1, 20123 Milano, Italy.
  • Larry H. P Lang
    Finance Department, Chinese University of Hong Kong, Hong Kong.
  • Leslie Young
    Asia Pacific Institute of Business, Chinese University of Hong Kong, Hong Kong.

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<jats:p> Whereas most U.S. corporations are widely held, the predominant form of ownership in East Asia is control by a family, which often supplies a top manager. These features of “crony capitalism” are actually more pronounced in Western Europe. In both regions, the salient agency problem is expropriation of outside shareholders by controlling shareholders. Dividends provide evidence on this. Group-affiliated corporations in Europe pay higher dividends than in Asia, dampening insider expropriation. Dividend rates are higher in Europe, but lower in Asia, when there are multiple large shareholders, suggesting that they dampen expropriation in Europe, but exacerbate it in Asia. (JEL G34, G35) </jats:p>

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