This paper examines the relationship between large shareholders and dividend payout decisions based on agency theory and investigates whether large shareholders are monitoring effectively. The study uses a panel dataset of 37 non-financial firms listed on the Kuwait Stock Exchange as an emerging market between 1999 and 2003. Random-effects probit models are used to examine the impact of large shareholders, firm size, free cash flows, investment opportunity, business risk, and firm profitability on the dividend amounts firms paid. Large shareholders are disaggregated into three types  institutions, governments, and large individual shareholders  to determine if they influence the dividend paid. The results suggest that government is the only large shareholder that plays a significant monitoring role on dividend decisions. Furthermore, the results show that government ownership and firm profitability increase the probability of paying dividends, while the leverage ratio decreases the probability. Overall, the findings indicate that companies listed on the Kuwait Stock Exchange pay dividends to reduce agency conflict and avoid exploiting minority shareholders.

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This study investigates the effect of government ownership structure, business risk and financial leverage among other variables (size, age and growth) on a company’s performance in a panel data, using 191 companies from five GCC countries (Qatar, Saudi Arabia, Oman, Bahrain and Kuwait), during the period 1999- 2006. Our results indicate that government ownership affects the performance and value of GCC firms. Government ownership positively and significantly affects firm’s performance ROA. The insignificance of a firm’s leverage (LEV) indicates that the firm’s performance is irrelevant to its capital structure, and that supports Modigliani and Miller (M&M) (1958) argument. Our finding is that business risk (BETA) significantly and positively affects firm’s performance ROE and supports the classic risk trade-off arguments. Furthermore, age was found to have a positive and significant impact on firm’s performance ROA and ROE.