Related party transactions and dividend payouts

Document Type

Article

Publication Date

10-1-2022

Abstract

This paper examines the association between Related Party Transactions (RPTs) and dividend payouts. Using a sample drawn from the S&P 1,500 firms and hand collected RPTs data between 2011 and 2018, we find that the magnitude of RPTs, measured by the number of transactions, is positively associated with the dividend yield. Additionally, we find that this relationship is mainly driven by RPTs that are classified as less opportunistic by prior studies. Our findings suggest that, when the magnitude of RPTs increases, firms tend to increase dividends to mitigate agency conflicts as agency problems become more prevalent.

Publication Title

Finance Research Letters

DOI

10.1016/j.frl.2022.103114

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