Business groups and pyramid structure and dividend policy: Evidence from Iranian firms

The main purpose of this study is to investigate the effect of business groups on dividend policy of companies listed on the Tehran Stock Exchange, taking into account the ownership structure of companies and the pyramid structure of business groups formed in Iran.

The statistical population of the present study is Tehran Stock Exchange. Based on the screening, the sample of this research includes 1679 observations from 441 companies listed on the Tehran Stock Exchange during the period 1397-1393. The required data has been extracted from the site of the Tehran Securities Exchange and Securities and Exchange Organization.

Consistent with the forecasts the results of this study show that the amount of dividends in companies affiliated to business groups is higher compared to independent companies. Also according to the results obtained in this study, among the companies affiliated to business groups, increase of voting rights of the final shareholder in group, the dividend paid by them increases. Also, in each of the business groups, companies located in the lower layers of the pyramid in the groups pay more dividends. In addition, the dividends paid by companies increase as the concentration of ownership in the hands of the largest shareholder or major shareholders increases.

From the results of this study, it is concluded that the formation of business groups and the pyramid structure of ownership formed between them can affect the dividend paid by the group member firms.

Contribution:

These results can help investors who attach great importance to corporate dividends to choose a company to invest in. It can also help shareholders of companies to take advantage of the internal capital market formed among groups and to use the dividends of other companies with more liquidity to address the lack of liquidity of member companies.