This paper focuses on dominant owners’ use of leverage to finance their blockholdings and its relationship to dividend policy. We postulate that blockholder leverage may impact payout policy, in particular when earnings are hit by a negative shock. We use panel data for France where blockholders have tax incentives to structure their leverage in pyramidal holding companies and study the effect of the financial crisis in 2008/2009. We find no difference in payout policy and financial behavior during the 1999 to 2008 period between firms with levered owners and other firms. However, in the years 2009 to 2011 following the crisis, dividend payouts increase in proportion to pyramidal debt of dominant owners. We inspect pyramidal entities individually and find that on average only 60% of dividends are passed through to the ultimate owners, with the rest predominantly used to meet debt service obligations of the pyramidal entities.
payout policy, blockholders, concentrated ownership, leverage, blockholder; private leverage, margin loans, insider pledging, pyramids, financial crisis.;
- G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill
- G34: Mergers • Acquisitions • Restructuring • Corporate Governance
- G35: Payout Policy
Sereeparp Anantavrasilp, Abe De Jong, Douglas V. DeJong et Ulrich Hege, « Blockholder Leverage and Payout Policy: Evidence from French Holding Companies », Journal of Business Finance and Accounting, vol. 47, n° 2, février 2020, p. 253–292.
Sereeparp Anantavrasilp, Abe De Jong, Douglas V. DeJong et Ulrich Hege, « Blockholder Leverage and Payout Policy: Evidence from French Holding Companies », TSE Working Paper, n° 19-1045, octobre 2019.
TSE Working Paper, n° 19-1045, octobre 2019