Title: Executive compensation and agency costs in a family controlled corporate governance structure: the case of Italy

Authors: Nalinaksha Bhattacharyya; Julie Ann Elston; Laura Rondi

Addresses: College of Business and Public Policy, University of Alaska Anchorage, 3211 Providence Drive, Anchorage, AK 99508-4614, USA ' College of Business, Oregon State University, 228 Cascades Hall, 2600 NW College Way, Bend OR 97701-5998, USA ' Politecnico di Torino and Ceris-CNR, Corso Duca degli Abruzzi, 24, Torino 10129, Italy

Abstract: This paper examines whether dividends are an important mechanism for mitigating agency costs in Italy. Corporate governance in Italy is distinguished by the fact that large numbers of firms are family controlled. Examining a panel of listed Italian firms from 2000-2007, we find that dividends play a significant role in mitigating agency costs, as they do in many countries. Empirical findings further suggest that increases in family control lead to a higher dividend payout; while higher levels of executive compensation leads to a lower dividend payout. Overall, findings suggest that dividends are effective at mitigating agency costs in the environment where family control over corporate governance is prevalent.

Keywords: dividends; executive compensation; Italy; family control; agency costs; corporate governance; family firms; family businesses.

DOI: 10.1504/IJCG.2014.064727

International Journal of Corporate Governance, 2014 Vol.5 No.3/4, pp.119 - 132

Received: 17 Feb 2014
Accepted: 25 Apr 2014
Published online: 30 Apr 2015 *

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