Corporate Governance, Dividend Smoothing, and the Interrelation between Dividends, R&D, and Capital Investment

This paper investigates the relationship between dividends and the ownership and control structure of the firm. For a panel of Austrian firms over the 1991/99 period, we find that statecontrolled firms engage in dividend smoothing, while family-controlled firms do not. The latter choose significantly lower target payout levels. Consistently, state-controlled firms are most
reluctant and family-controlled firms are least reluctant to cut dividends when cuts are warranted. The dividend behavior of bank- and foreign-controlled firms lies in between stateand family-controlled firms. This is consistent with the expected "ranking" of information
asymmetries and managerial agency costs. The above results hold for firms with good investment
opportunities. We find that firms with low growth opportunities optimally disgorge cash irrespective of who controls the firm.