|
Controlling Shareholders' Opportunism:
The Case of Stock Repurchase and Cash Dividends
Soon Suk Yoon, Chonnam National University
Hyo Jin Kim, Chonnam National University
ABSTRACT. The study examines how stock repurchase and dividends are affected by disproportionately stronger voting rights of controlling shareholders. We argue that repurchase is utilized opportunistically by controlling shareholders, especially when their voting rights are in excess of cash flow rights. Our sample consists of the Korea Stock Exchange firms during 2004 and 2005. We find that repurchase and dividends are complements of each other. The higher the repurchase is, the higher the dividends are. Firms for which the gap between cash-flow rights and voting rights is big repurchase more stocks. This implies that controlling shareholders with disproportionately stronger voting rights exploit external shareholders. Firms with low gap pay more dividends. Firms with both repurchase and dividends show better cash flows than firms with neither repurchase nor dividends. Cash flows are lower for firms with repurchase only than for those with neither repurchase nor dividends.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|