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State ownership and ownership concentration as determinants of dividend policy
Název práce v češtině: Státní vlastnictví a koncentrace vlastnictví jako determinanty dividendové politiky
Název v anglickém jazyce: State ownership and ownership concentration as determinants of dividend policy
Klíčová slova: Dividendová politika, Dividendy, Státem vlastněné podniky, Koncentrace vlastnictví, Akcionář, Kótovaná společnost
Klíčová slova anglicky: Dividend policy, Dividends, State-owned enterprise, Ownership concentration, Ownership structure, Shareholder, Listed company
Akademický rok vypsání: 2017/2018
Typ práce: bakalářská práce
Jazyk práce: angličtina
Ústav: Institut ekonomických studií (23-IES)
Vedoucí / školitel: Mgr. Aleš Čornanič
Řešitel: skrytý - zadáno vedoucím/školitelem
Datum přihlášení: 13.06.2018
Datum zadání: 13.06.2018
Datum a čas obhajoby: 11.06.2019 09:00
Místo konání obhajoby: Opletalova - Opletalova 26, O105, Opletalova - místn. č. 105
Datum odevzdání elektronické podoby:10.05.2019
Datum proběhlé obhajoby: 11.06.2019
Oponenti: Mgr. Barbora Gregor
Kontrola URKUND:
Seznam odborné literatury
Lam Kevin C.K., Sami H., Zhou H. (2012). The role of cross-listing, foreign ownership and state ownership in dividend policy in an emerging market. China Journal of Accounting Research 5.

Gordon M. J. (1959). Dividends, Earnings, and Stock Prices. The Review of Economics and Statistics 41.

Bremberger F., Cambini C., Gugler K. and Rondi L. (2013). Dividend Policy in Regulated Firms. EUI Working Paper RSCAS 53.

Jensen Michael C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeover. American Economic Association 76.

Jensen Michael C., Meckling William H. (1976). Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure. Journal of Financial Economics 3.

Lintner J. (1956). Distribution of Incomes of Corporations among Dividends, Retained Earnings, and Taxes. The American Economic Review 2.

Heaney R., Truong T. (2007). Largest shareholder and dividend policy around the world. The Quarterly Review of Economics and Finance 47.

Fama F. Eugene, French R. Kenneth (2001). Disappearing dividends: changing firm characteristics or lower propensity to pay?. Journal of Financial Economics 60.

Reyna M. S. M. Juan (2017). Ownership structure and its effect on dividend policy in the Mexican context. Contaduría y Administración 62.

OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris.

Booth L, Zhou J. (2017). Dividend policy: A selective review of results from around the world. Global Finance Journal 34.

Rozeff M. (1982). Growth, beta and agency costs as determinants of dividend payout ratios. Journal of Financial Research 3.

Manry D., Wandler S., Wang X. (2011). The impact of government ownership on dividend policy in China. Advances in Accounting, incorporating Advances in International Accounting 27.

Ho, H., (2003). Dividend Policies in Australia and Japan. International Advances in Economic Research 9.
Předběžná náplň práce v anglickém jazyce
Research question and motivation

Dividends are for many investors the key motivation when buying a stock. Moreover, according to various models, they determine the intrinsic stock value, e.g. Gordon Growth Model (Gordon, 1959). There are various models and research papers analyzing determinants of dividend policy. One of the first models ever developed to explain firm’s dividend policy decisions was constructed by John Lintner in 1956. Lintner’s (1956) model proposed that firms adjust dividends as their net income fluctuates and that their target payout ratio is set such that it can be sustainable in the long run. Naturally, the fact that dividend policy is basically affected by net earnings and investment opportunities with positive net present value was empirically proven many times, e.g. by Fama & French (2001) and Truong & Heaney (2007). In many cases, however, dividend policy does not correspond to such basic determinants and seems to be inappropriate in terms of firm’s performance and future projects. Such a failure of the fundamental determinants provides motivation for further research, especially on the non-performance factors influencing magnitude and type of dividends. A lot of research papers clarifying the effects of such determinants were already published. For instance, Ho (2003) supported a positive relationship between liquidity and dividends with his signaling theory of dividend policy, Rozeff (1982) revealed a negative relationship between leverage and dividends with argumentation of the agency problem theory or Booth & Zhou (2017) proposing negative relationship for risk.

Another non-performance determinant of dividend policy is ownership structure, which directly affects corporate governance and thus dividend payout ratio (Reyna, 2015). Large amount of free cash flow means excess cash in hands of firm’s management, which can result in the issue known as agency problem. To prevent such a conflict, the management should be under monitoring of the stock holders or the managers should not be in possession of excess funds. Since individuals with larger shares are more motivated to supervise the firm’s management, the ownership concentration is the one of the most effective corporate governance mechanisms (Jensen and Meckling, 1976). When the supervision is absent, another tool to prevent the agency problem are higher dividends, since higher dividend payments result in less cash in possession of the managers. Thus, to finance large project, the firm needs to go to capital markets to raise new capital, resulting in firm’s examination by potential creditors. (Jensen, 1986).

Based on the mentioned findings, I would like to examine the relationship between ownership concentration and dividends. I conjuncture that high ownership concentration is negatively correlated with dividends, since larger shareholders tend more to supervise the company and care more about the firm’s future performance. Apart from the ownership concentration, a different view of ownership structure may also be the type of the owner, e.g. individual, institutional or state. Such various types of ownership are also subjects research in terms of its impact on dividend policy. Reyna (2015) empirically showed that there is a significant difference in dividend policy between companies owned by individuals and by institutions at least in Mexico, where he realized his research. Research on the effects of state ownership were realized primarily in China, e.g. by Wang et al. (2011).

Government tends to regulate strategic industries, e.g. energy industry (Bremberger et. al., 2013). Moreover, big players in such strategic markets are, in many cases, partially or fully owned directly by state and these State-owned enterprises (SOEs) are predominant providers of key public services. (OECD, 2015). Since state usually owns substantial share in such companies (OECD Directorate for financial and enterprise affairs, 2007), conjecture that their dividends may be higher than usual would be in contrast with the hypothesis regarding ownership concentration and dividends. However, fact, that dividends are taxed immediately in contrast to capital gains with tax credit conditional on time period of the shareholding, may serve as a good incentive for SOEs to pay larger dividends and prefer cash dividends over share buybacks since the taxes on cash dividends of the private shareholders would also mean additional income for the government. Another motivation may be that government may need funds to government budget.

Empirical research on state ownership and its effect on dividends regarding listed companies was primarily applied to the Chinese market, where government participation in the economy is of greater magnitude, e.g. Wang et al. (2011) or Lam et al. (2012). These research papers argue that, ceteris paribus, SOEs exhibits higher dividends than purely private firms. Since there are also listed SOEs in the EU market, I would like to test such a conjecture in the EU environment.


H1: Ownership concentration has a negative effect on dividends.
H2: Firms partially owned by state have higher dividend payout ratio than those without state participation.
H3: Potential state ownership effect of higher dividends is increasing with concentration. (Contrast with hypothesis H1)
H4: Firms partially owned by state have lower tendency to perform share buyback as a tool of paying dividends.


In this thesis, I would like to reveal dividend policy preferences of SOEs and provide an empirical evidence, that state does not behave as classical long-term shareholder even though it usually holds its stocks in long-term horizon.
Potential relationship between state ownership and dividends would give to the investors another factor for consideration when seeking stocks with higher dividend yield. Moreover, the magnitude of this potential effect with respect to ownership concertation should be clarified as well.


I am going to work with both types of quantitative data and qualitative data in form of binary information. To obtain the relevant data, I will use the services of companies providing economic and finance data such as Bloomberg or Reuters. As an alternative may be the Yahoo finance web page, where I can obtain the data for every firm separately. Size of the sample of listed SOE in EU is supposed to be in order of dozens as governments tend to hold shares in the strategic industries.


To analyse the outlined hypotheses, I am going to apply the multiple regression model along with use of OLS estimators.
The main explanatory variable is supposed to be dummy and it will be the ownership of the government divided into several categories based on the share owned. Most variables I going to use in my empirical research are quantitative and their main purpose will be to reduce the amount of disturbances arising from covariance between explanatory variables. Such controlling variables will be various ratios analysing company’s operational performance and profitability. Since every industry is very specific in terms of investment opportunities, profitability and market outlooks, it will be important to compare companies always within a same industry.


1. Introduction
2. Review of relevant literature on dividend policy models and corporate governance
3. Hypothesis development
4. Data and Methodology
5. Econometric model
6. Results discussion and interpretation
7. Conclusion
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