CORPORATE OWNERSHIP, DIVIDEND POLICY, AND CAPITAL STRUCTURE UNDER ASYMMETRIC INFORMATION.

摘要

This study investigates the role of insider ownership in the dividend policy and the leverage decision of the firm. An asymmetric information model is developed with the proportion of equity owned by insiders, dividend payout, and debt as signals of firm value. Analysis of the model yields testable hypotheses that insider ownership is negatively related to the payout and debt ratio of a firm. Cross-sectional regression analysis of leverage and payout ratio of the insider ownership is performed to test for the hypotheses.;The empirical evidence is consistent with the hypotheses that closely held firms have lower leverage and payout ratios compared to widely held firms. Two insider ownership variables: (1) percentage of insider ownership and (2) number of insiders are used to measure ownership control. The percentage of insider ownership is negatively related to the payout and leverage while the number of insiders has a positive relationship. The relationships are stable over time. The results also indicate that industry factors are significant in explaining variations in payout and leverage ratios across firms.;A significant positive relationship is observed between insider ownership and the non-systematic risk of a firm. This finding tends to reject the risk aversion explanation, as firms with large non-systematic risk have higher insider shareholdings than firms with small non-systematic risk, after controlling for size. The relationship between insider ownership and systematic risk is negative, which is consistent with lower leverage for such firms.;Finally, the study finds conflicting evidence for dividends and leverage being "substitute signals" of firm value. In some industries analyzed, payout and leverage ratios are positively related while in other industries the relationship is negative.;The hypothesis that firms with large insider holdings have lower leverage than firms with small insider holdings is a joint test of the signalling and risk aversion explanations. An examination of the systematic and nonsystematic risk across closely and widely held firms is used to differentiate between the alternative explanations.