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Lau, James

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  • Paper Title: Founding Family Ownership and Dividend Smoothing
  • Department Affiliation: Accounting and Corporate Governance
  • Supervisors’ Names:
    • Principle: Doctor Elaine Evans
    • Associate: Doctor Sue Wright


This paper examines the relation between ownership structure and dividend smoothing by comparing the degree of dividend smoothing engaged in by family and non-family firms. It is expected that family firms to exhibit less dividend smoothing behaviour than non-family firms, due to lower agency conflicts and less information asymmetry experienced by family firms.


While the presence of dividend smoothing is well documented in the literature, there are however relatively few studies exploring the cross-sectional variation in firms’ dividend smoothing policy and their associated firm characteristics. This paper provides evidence on the association between ownership structure and dividend smoothing policy in a cross-sectional setting.

Key literature/theoretical perspective:

Agency theory, Information asymmetry


This paper modifies the Lintner model of dividend smoothing by including a family firm indicator variable and an interaction variable.


According to a sample of S&P 500 firms from 1997 to 2007, results indicate that the degree of dividend smoothing engaged in by the family firms are significantly less than the non-family firms. Further, it is identified that the source of difference arises from the family firms’ willingness to increase their dividends, rather than their willingness to cut dividends in response to significant earnings changes. Overall, there is a strong interaction between ownership structure and dividend smoothing.

Research limitations/implications:

The sample is limited to S&P 500 with an investigation period of 11 years. Compared to the other dividend smoothing studies that draw their samples from the entire stock exchanges combined with a longer investigation period, the sample is relatively small.      
Practical and Social implications: This paper enhances the understanding of how family control affects corporate dividend policy.


Family firms, Agency conflict, Information asymmetry, Dividend smoothing.