Institutional Ownership Stability and Dividend Payout Policy (2024)

See all articles by Surendranath Rakesh Jory

Surendranath Rakesh Jory

University of Southampton - Southampton Business School

Thanh Ngoc Ngo

East Carolina University

Hamid Sakaki

Central Connecticut State University

Abstract

We study the link between institutional ownership stability and dividend payout ratio. We find that stable and large institutional owners favour dividend paying companies. There also exists a positive association between ownership persistence and dividend payout. Conversely, firms that change their dividend payout frequently are associated with larger deviations in institutional ownership. Additionally, the presence of pressure-sensitive institutional investors (i.e., investors that also hold business ties with the investee firm) is significantly linked to dividend payout policy. Conversely, pressure-insensitive investors use alternative forms of monitoring instead of requiring investee firms to pay dividends, which serve to reduce agency conflicts.