Company Dividends and Ownership Structure: Evidence from UK Panel Data* 


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    I am indebted to Steve Bond for his extremely helpful comments and guidance and also to Lucy Chennells for work done to set up the dataset. I also thank Colin Mayer and Alberto Behar for useful suggestions as well as the participants of the Royal Economic Society Annual Conference (2005), the Gorman and Finance Workshops at Oxford. This article forms part of a project on ownership structure and company dividends at the Institute of Fiscal Studies.


This study investigates the relationship between dividends and ownership structure for a panel of 330 large quoted UK firms. Controlling for unobserved firm-specific effects, results indicate a negative relationship between dividends and ownership concentration. Ownership composition also matters, with a positive relationship observed for shareholding by insurance companies, and a negative one for individuals. These results are consistent with agency models in which dividends substitute for poor monitoring by a firm's shareholders but can also be explained by the presence of powerful principals who are able to impose their preferred payout policy upon firms.