American Economic Review: Vol. 91 No. 1 (March 2001)


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Dividends and Expropriation

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Faccio, Mara, Larry H. P. Lang, and Leslie Young. 2001. "Dividends and Expropriation." American Economic Review, 91(1): 54-78.

DOI: 10.1257/aer.91.1.54


Whereas most U.S. corporations are widely held, the predominant form of ownership in East Asia is control by a family, which often supplies a top manager. These features of "crony capitalism" are actually more pronounced in Western Europe. In both regions, the salient agency problem is expropriation of outside shareholders by controlling shareholders. Dividends provide evidence on this. Group-affiliated corporations in Europe pay higher dividends than in Asia, dampening insider expropriation. Dividend rates are higher in Europe, but lower in Asia, when there are multiple large shareholders, suggesting that they dampen expropriation in Europe, but exacerbate it in Asia.

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Faccio, Mara (Catholic U Sacred Heart)
Lang, Larry H. P. (Chinese U Hong Kong)
Young, Leslie (Asia Pacific Institute of Business, Chinese U Hong Kong)

JEL Classifications

G34: Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
G35: Payout Policy
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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