The Effect of Institutional Ownership on Payout Policy: A Regression Discontinuity Design Approach

Alan D. Crane, Sebastien Michenaud, James Peter Weston
2012 Social Science Research Network  
We show that higher institutional ownership causes firms to pay more dividends and repurchase more shares. Our identification strategy relies on a discontinuity in ownership based on the annual composition of the Russell 1,000 and 2,000 indices. We also find evidence of a causal effect on proxy voting, corporate investment, R&D, and equity issuance. Overall, results support agency models where concentrated ownership lowers the marginal cost of delegated monitoring. Working Paper.
doi:10.2139/ssrn.2102822 fatcat:z2jlsaxd2vfxrfmljioxxbcpqi