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Minority Protection and Dividend Policy in Finland
Author(s) -
Kinkki Seppo
Publication year - 2008
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2007.00408.x
Subject(s) - shareholder , dividend , dividend policy , voting , business , equity (law) , agency cost , cash , monetary economics , economics , corporate governance , finance , law , political science , politics
This paper highlights some theoretical arguments and empirical results on whether legal‐based minority protection affects corporate cash dividends in Finland. The Company Act in Finland states that shareholders having one tenth of all shares can demand a so‐called minority dividend, which is half of the profit of the fiscal year, yet not more than 8% of the equity. Minority dividend, as in Finland, is rarely used in EU countries. I find, that minority protection is a better influence over managerial control than controlling shareholders having absolute voting power. When there is no controlling shareholder and coalition costs are lowest, minority protection in Finland is better than minority protection in mandatory dividend countries. Combining strong shareholder rights (as in the USA) and minority dividend (as in Finland) could decrease agency costs both vertically and horizontally.