Agency Issues in a Family Controlled corporate governance—The case of Italy
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Abstract
This study provides empirical evidence on the relationship between
dividend payout ratios, executive compensation and agency costs in Italy. Corporate
governance in Italy is distinguished by the fact that a large number of Italian firms are
family controlled, which may theoretically reduce asymmetry of information and
associated agency costs. Using a panel of listed manufacturing firms we find evidence
that family control plays a significant role in resolving agency issues, i.e. that increases
in family control of the firm lead to a higher dividend payout. Nevertheless, as we also
find that managerial compensations are negatively related to dividend payout ratios,
even in this family controlled environment, dividends do play their role in mitigating
agency problem