THE INFLUENCE OF THE CEO AND THE LARGEST SHAREHOLDER ON DIVIDEND PAYOUT POLICY IN THAILAND

In a setting of weak law enforcement and low investor protection, minority shareholders may find it difficult to extract cash from a company. This paper examines whether or not the CEO and the largest shareholder affect dividend decisions. Using a sample of Thai firms, I find that the CEO tenure and the ownership of the largest shareholder increase the likelihood of a dividend payout. As a result of high commitment and incentives, CEOs and the largest shareholder use dividend payments as a mechanism to mitigate free cash flow problems and reduce potential expropriation of minority shareholders. In addition, the possibility of a dividend payout decreases if firms are controlled by domestic financial institutions. Domestic financial institutions seem to play a significant role in monitoring management teams; consequently, the need for a dividend payment in alleviating agency costs is lower than other firms. Moreover, firms are more likely to pay dividends when they have higher profitability and a lower leverage ratio.