| Summary: | 碩士 === 輔仁大學 === 金融研究所 === 95 === There is an agency problem between control shareholders and minority shareholders because the ownership structure is concentrated and the board of director is control by family in the Taiwan Listed business group. The essay took advantage of the Taiwan Listed business group’s data to prove the long term relationship between corporate governance and dividend policy. The result shows that those companies with bad corporate governance and high agency problem will pay more dividends compared to those with good governance and low agency problem.
The result indicates that dividends as a vehicle to reduce agency problem between control shareholders and minority shareholders. That is the payment of dividends exposes companies to capital markets in the future when they have to raise external funds and hence give external market an opportunity to monitor the inside operating and reduce company free cash flow. The result also indicates that in order to get external funds, company should build up a reputation for not expropriation from minority shareholders by paying dividends.
Specially, when control shareholders’ cash flow rights are increasing above average, that is corporate governance better than others, the companies with high control shareholders’ cash flow rights didn’t build up a reputation for not expropriation from minority shareholders by paying dividends.
Therefore, if company could operate dividend policy effectively, it could build up a reputation for not expropriation from minority shareholders. And then company could strive to create firm’s value and maximize shareholders’ wealth.
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