Shareholder coalitions and dividends: evidence from the Brazilian capital market

Abstract

This article examines the effect of the heterogeneity of shareholder coalitions on the distribution of dividends in companies listed in Brazil. To analyze the relationship between large shareholders and dividends, it is essential to consider the way the control is ensured. Large shareholders can share control by forming coalitions, and differences in the composition of coalitions can alter the incentives the cooperating parties have for the activity of monitoring. Based on shareholder agreements, we explore the heterogeneity among shareholder coalitions by presenting elements that can characterize the role of shared control in the corporate governance of companies in a market environment described by the concentration of control in a single large shareholder. This study presents potential economic and social impacts, as it is of particular interest to outsider shareholders, and even potential investors, to know how insiders can use dividend policy, since the distribution of profits tends to mitigate agency problems. To identify the shareholder coalitions we resorted to shareholder agreements. The analysis model was estimated using the two-stage system generalized method of moments (GMM-Sys) with unbalanced panel data for the period from 2008 to 2019. We discovered that the number of shareholders in the coalition and the leveraging of the voting rights of the biggest shareholder in the coalition are negatively related to the dividends distributed, and that the voting rights of the coalition are positively related to the dividends distributed. These results contribute to the principal-principal approach of agency theory and highlight that the incentives and capacity of shareholder coalitions to pursue private benefits of control depend on their own characteristics.