Unraveling the Payout Puzzle

Abstract: Purpose: The purpose of this study is to investigate if institutional ownership has an impact on a firm’s total payout ratio in Swedish firms. Methodology: The study uses fixed effects models with robust standard errors clustered by firm with year effects and provides several robustness checks by altering the dependent variable in our analysis. Theoretical perspectives: The theoretical framework of this study is based on the theories concerning payout policies and corporate governance issues, which have been applied within the context of the specific research field of the study. Empirical foundation: The sample consists of annual data from firms listed on the Stockholm Stock Exchange (SSE Nasdaq OMX), First North, and Nordic Growth Market, covering the period from 2013 to 2022. Conclusions: The paper finds no statistically significant evidence supporting the notion that institutional ownership has an impact on a firm’s total payout ratio in Swedish firms. This holds true even when changing the dependent variable to dividend ratio. Further, the results remain consistent when only including firms with positive net income.