The Relationship between Promoters’ Holdings, Institutional Holdings, Dividend Payout Ratio and Firm Value: The Firm Age and Size as Moderators

Abstract

The present paper aims to empirically examine the effect of promoters’ holdings and institutional holdings on dividend payout ratio and the firm value. Most importantly, this paper explores the age and size of the firm as the moderators in the relationships. Data collected from 23 companies from India and 253 data points were analyzed to test the hypothesized relationships. The results indicate that promoters’ holdings and institutional holdings are positively associated with dividend payout ratio and firm value. Further, moderator hypotheses suggest that (i) firm age moderates the relationship between promoters’ holdings and dividend payout ratio, (ii) firm size moderates the relationship between institutional holdings and dividend payout ratio, (iii) firm age moderates the relationship between promoters’ holdings and firm value, and (iv) firm size moderates the relationship between institutional holdings and firm value. The implications for theory and practice are discussed. The conceptual model developed and tested in this research contributes to both the literature on dividend payout ratio and firm value and to the needs of institutional investors interested in increasing the firm value.