Does vote differention affect dividend payout policy? : A study on swedish listed firms

Abstract: This thesis investigates what effects control enhancing mechanisms that are associated with vote differentiation have on dividend payout policy among Swedish listed firms. The data collected for this study is for the period 2005-2007 and the sample consists of 109 companies where 61 of these have shares that are vote differentiated, and the remaining 48 companies have the one share –one vote structure. The variables in the regressions are dividend payout ratio, a dummy for vote differentiation, growth in earnings, size, Tobin’s Q and ownership structure. Three separate hypotheses are applied for reaching a scientific answer to the thesis question. The results indicate that dividend payout policy is significantly negatively affected by the presence of vote differentiation and that vote concentration among the five largest shareholders is generally higher in such firms. The results do also indicate that dividend payout is determined by firm size, growth and investment performance which are in line with earlier studies. From the results, parallels have been drawn between investment performance, ownership concentration, vote differentiation and dividend payout policy. Firms that have vote differentiated shares tend to overinvest instead of paying out dividends when this presumably would be a more appropriate decision considering the aspect of efficiency. As a final conclusion based on the findings, the thesis confirms the argument on that vote differentiating among shares should be reconsidered for better reforms.