Family Involvement and Dividend Policy in Closely Held Firms

Abstract

This article examines the effects of family involvement on dividend policy in closely held firms that face agency problems involving majority–minority shareholders. We argue that minority shareholders press for dividends when they perceive situations fostering wealth expropriation. Looking at 458 Colombian companies, we find that family involvement in management does not affect dividend policy; family involvement in both ownership and control through pyramids affects dividend policy negatively; and family involvement in control through disproportionate board representation affects dividend policy positively. Thus, family influence on agency problems, and hence on dividend policy as a mitigating mechanism, varies depending on family involvement.

What Are Boards For? Evidence from Closely Held Firms in Colombia

“…3 As a result, our measures can be considered a lower bound of controlling shareholders' power or ownership concentration in the firm. Conversely, to the extent that most minority shareholders in our sample are likely to be family related (González et al, 2014), our article sheds new light on the family firms literature by capturing within-family dynamics across shareholders.…”

“…Lipson, Maquieira, and Megginson (), Lee (), and González et al. () also employ dividend‐to‐assets as a dependent variable.…”

In Search of the Best of Both Worlds

“…As a consequence, many tables of results are reported, including those detailing data breakdowns revealing the nature of the sample, results from using different statistical methods, and robustness checks (Miller, 2008). This is effectively accomplished, for example, in the papers by Gonzalez et al (2014), Fernando et al (2013), and Jain and Shao (2014), which present detailed decompositions of their data and execute several robustness and sensitivity analyses to show that their findings are not driven by alternative explanations. Despite these sound and rigorous methods which characterize the finance field, our review of the reports of rejected finance papers at FBR reveals that, paradoxically, these often are lacking in completeness, clarity, and credibility in all the above respects (Zhang and Shaw, 2012).…”

“…Indeed, we have observed a significant increasing trend in submissions from the finance field during the past 3 years. Several papers investigating various topics, including the valuation process (Zellweger & Dehlen, 2012), executive remuneration (Michiels, Voordeckers, Lybaert, & Steijvers, 2013), investment policy (Fernando, Schneible, & Suh, 2013;Jain & Shao, 2014), financial decision making (Koropp, Kellermanns, Grichnik, & Stanley, 2014), and dividend policy (Gonzalez, Guzman, Pombo, & Trujillo, 2014) have been published or accepted for publication during this period.…”

Who controls the board in non-profit organizations? The case of private higher education institutions in Colombia

“…According to Morck and Yeung (2004), rent-seeking is a negative sum game that has the highest return from the viewpoint of each individual but that destroys value for society as a whole. It represents a behavior that allows individuals to get pecuniary private benefits against the common interest (Barclay and Holderness 1989), implies exploiting organizational resources to achieve this goal (Anderson and Reeb 2004), could cause large inefficiencies (Shleifer and Vishny 1989), and harms economic growth because it affects productivity and innovation (Murphy, Shleifer and Vishny 1993). protection (González et al 2014, González et al 2015. We examine the functions of the assembly of representatives and its structure to facilitate the fulfillment of those functions.…”