The varying need for dividends : A comparative study of the impact of ownership concentration in Sweden and UK
Abstract: The increased integration of global markets continuously generates influences, challenging traditional corporate governance models. Ownership concentration is one of the most fundamental features of corporate governance, and is expected to determine shareholders’ ability to monitor the corporation's management to ensure that the company is run in the best interest of its financiers. Thus, depending on the degree of ownership concentration, the investor is expected to have a varying need of receiving frequent returns on investment. In light of principal-agent theory, the objective of this paper is to examine ownership concentration and its proposed effect on dividend payouts. By investigating approximately 300 companies listed on the UK and Swedish stock exchanges, this paper firstly seeks to establish whether there are significant difference in ownership concentration between the Nordic and Anglo-Saxon corporate governance models. The results find that traditional differences in ownership concentration persist, yet observe a tentatively increasing similarity in the average stakes held by the ten and five largest shareholders respectively. Secondly, the results of a multiple regression reveal a negative relationship between ownership concentration and dividend payouts, supporting the explanation provided by principal-agent theory. The implications thus suggest agency problems to be relatively more prevalent in Anglo-Saxon countries than in the Nordic equivalent, reinforcing previous research findings in the area.
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