Title: Managerial entrenchment hypothesis and dividend payout policy

Authors: Raheel Gohar; Ayesha Rashid

Addresses: College of Business Administration, Al Yamamah University, Riyadh, Kingdom of Saudi Arabia ' National University of Sciences and Technology (NUST), Business School, Islamabad, Pakistan

Abstract: The influence of managerial entrenchment on dividend payout policies is studied for the period 2006 to 2014. The results of the study indicate that the ratio of the sum of shares owned by the CEO, the Chairman and the directors (i.e., insider ownership) is negatively related to both the likelihood and the payment of dividends. Even when controlling for firm size and leverage, it is found that the ratio of shares owned by the block holder shows negative and significant results (for both the logit and the tobit regression). This study proves that either the block holders are part of the management or they have strong board representation, so they do not consider dividend payouts as a disciplining and monitoring mechanism. Investment opportunities and leverage have a negative and significant relationship with both the likelihood and the level of payouts.

Keywords: managerial entrenchment; dividend payout policy; logit and tobit regression; Pakistan.

DOI: 10.1504/AAJFA.2021.113551

Afro-Asian Journal of Finance and Accounting, 2021 Vol.11 No.2, pp.222 - 236

Received: 10 Feb 2018
Accepted: 27 Oct 2018
Published online: 11 Mar 2021 *

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