Journal of Economics and Development Studies

December 2015, Vol. 3, No. 4, pp. 19-30

ISSN: 2334-2382 (Print), 2334-2390 (Online)
Copyright © The Author(s). All Rights Reserved.
Published by American Research Institute for Policy Development
DOI: 10.15640/jeds.v3n4a3
URL: http://dx.doi.org/10.15640/jeds.v3n4a3

The Relationship between Ownership Structure and Dividend:

An Application in Istanbul Stock Exchange1

Ilker Sakinc2 & Selim Gungor3

Abstract

This study defines the ownership structures of 271 real and banking sectors companies registered in the
Istanbul Stock Exchange between 2004-2011 years and the impact of ownership structure on dividend was
determined by panel data analysis. According to the results of the analysis, it has been observed that the
largest shareholder has about 45.37 percent of the shares. Therefore, it has been concluded that companies in
the real and banking sector has mostly concentrated ownership structure. Ownership structure is described
with two main sub-variables: ownership concentration and ownership composition. It is determined that
increase in the concentration of ownership increases the proportion of cash dividend. As the free float rate
increases, dividend payout ratio decreases. A negative relationship was found out between the foreign
ownership of ownership composition variables and dividend payout ratio. This result is statistically
significant. Accordingly, the more is the ratio of the foreign ownership, the less is the dividend rate. In
addition, increase in the ratio of managerial ownership decreases dividend payout ratio. However, this result is
not statistically significant.

Keywords: Ownership Structure, Ownership Concentration, Ownership Composition, Corporate Governance,

Dividend Policy

I. Introduction
Lack of theories regarding the dividend policies in identification of the firm value has led researchers to
further discussion on this subject. Modigliani and Miller’s (1961) claim “Perfect markets do not have an impact on a
company’s dividend decisions” deepened these discussions. On the other hand, Lintner (1962) and Gordon (1963)put
forward the idea of “"High dividend payment is associated with the value of the high companies in a world of
uncertainty and incomplete information” in his Bird- in- Hand Theory. Aforementioned discussion in the finance
literature then reached to different dimensions, but the problem continued, as Black (1976) suggested, like a jigsaw
puzzle pieces that fail to comply with each other stagnant in the same point.
As mentioned in the work of Aniland Kapoor (2008), there is a consensus that a single factor cannot explain
the behavior of the dividend. For this reason, financial researchers determined some factors specific to company in
terms of taking dividend decisions (including the ownership structure).The first of these factors proposed for dividend
decisions is the problem of information asymmetry between executives and shareholders associated with imperfect
capital markets.

1This study was formed from the master thesis named as “The relationship Between Ownership Structure and Dividend: An application on
ISE” made by SelimGungor.
2Hitit University, FEAS,Department of Bankingand Finance, Corum, Turkey. Email: ilkersakinc@hitit.edu.tr; Phone:+90 364

2257700/1449; Fax: +90 364 2257710

3GaziosmanpasaUniversity, ResadiyeVocational School, Department of ForeignTrade, Resadiye, Tokat, Turkey. Email:

selim.gungor@gop.edu.tr; Phone: +90 356 4613355; Fax: +90 356 4614355

20 Journal of Economics and Development Studies, Vol. 3(4), December 2015

Described as signal theory according to this theory, dividend policies are assuming the task of special
knowledge transfer tool from dividend management policies to shareholders. Empirical evidences not only prove that
there is a relationship between the recent past, future business performance and dividend policies but also (De Angelo
et al. 1992; Benartzi et al. 1997; and Nissim and Ziv, 2001) ; confirm investors are familiar with the value of the
company shares. (Aharony and Swary, 1980; Asquith and Mullins, 1983 and Healy and Palepu, 1988) In addition to
these, empirical evidences reveal that dividends are being used for public informational purposes(signal effect) by
management (Bhattacharya, 1980; Miller and Rock, 1985 and John and Williams, 1985).
The second factor taking dividend decision is agency problem which is caused by conflicts of interest
between shareholders and managers. According to this theory, called as dividends’ agency costs; power of attorney
and proxy should maximize the benefits of their own behavior. As a natural result of this situation, it can be seen that
each interest group, who are the subject of the contract, focused on increasing their own interests. As a solution to the
agency problem, Jensen and Meckling (1976), Rozeff (1982),Easterbrook (1984) and Jensen (1986) support the
relationship between the existence of institutional theories, ownership structure and dividend behaviors along with the
opinion of the “Dividends indirectly give the shareholders the possibility of monitoring the management of a
company.” Dividends can reduce this problem by restricting the power and authority of the administrator on
management who continuously refers to the capital market for funds.
Another important factor affecting dividend policies is the ownership and control structures of companies.
Shareholders, having different potential in companies, have different rights in management according to the
proportion of their shares. Controlling shareholders who have more shares can have a voice in shaping the minority
shareholders who have interests of the company; directly intervening the decision making and execution activities
(Yıldız et al. 2014).Although there are some studies carried out regarding the exemplar ownership structure in Turkey,
it is possible to say that there are no studies carried out for the empirical studies which examine the relationship of
"ownership structure-dividend". For this reason, this study aims to fill the deficiency in this field and also contributing
to the shareholders, potential investors, managers and researchers who will do research on this subject.
This study observes the relationship between the concept of the ownership structure of a company and
dividend on the Turkish companies. The aim of the study is to show different ownership structures of the 271
companies which operate in Istanbul Stock Exchange in2004-2011 and test whether there is a relation between this
structure and dividend payments by panel data analysis. In this study, the concept of ownership structure will be
addressed in two variables as ownership concentration and ownership composition hence, summary of the literature
are explored through these two variables.
2. Literature Review
The ownership concentration corresponds to the shares of the individual or corporate shareholders in the
distribution rate of shares of companies. In our study, variables of ownership concentration are represented in 4 sub
variables as following; the largest shareholder ownership ratio (M1),the second largest shareholder in the ownership
ratio (M2),the third-largest shareholder in the ownership ratio (M3), and free float rate(PR). For this reason, in this
section test studies are included about the relation between sub variables and dividend.The largest shareholder means
the maximum stake partner among the company shareholders.
When ranked from top to bottom according to the shares of the stakeholders, one that is located on the top
is the largest shareholder. Studies of Maury and Pajuste (2002) in Finland; Guglerand Yurtoğlu (2003) in Germany;
Thomsen (2005) in continental Europe Countries; Renneboog and Trojanowski (2005) in United Kingdom;
Mancinelliand Özkan (2006) in Italy; Chkir and Saadi (2007) in Canada; Amoako-Aduet al. (2009) in United States;
VintilaandMoscu (2012) in RomaniaandBerezinets et al. (2014) in Russia concluded that there is a negative
relationship between the ownership ratio of the largest shareholder and dividend.
In other words, as the proportion of shares owned by the largest shareholder increases, dividend payout ratio
reduces. On the other hand, Wallgren (2006) in Sweden; Ramli (2010) in Malaysia; Daradkah and Ajlouni (2013) in
Jordan; Thanatawee (2013) in Thailand and Thanatawee (2014) in China observed the companies there and concluded
that there is a positive relationship between the ownership ratio of the largest shareholder and dividend. In other
words, growth in the proportion of largest shareholder in the company, increase the dividend payout ratio.
Sakinc & Gungor 21

According to the studies ofBenaandHanousek (2006) inCzechRepublic; Sharif et al. (2010) in

IranandDandago et al. (2015) in Nigeria,it is concluded that there is no statistical significance relationship between the
ownership ratio of the largest shareholder and dividend. The second-largest shareholder has the second largest share
among the partners. When ranked from top to bottom according to the shares of the stakeholders, one that is located
in the second row from the top.
Studies of Maury and Pajuste(2002) in Finland; Renneboog and Trojanowski (2005) in the UK, and the
Berezinets et al. (2014) in Russia concluded that there is a negative relationship between ownership ratio of the second
largest shareholder and dividend. In other words, as the share ratio of the second largest shareholder increases,
dividend payout ratio reduces. According to the results Guglerand Yurtoğlu (2003) in Germany and Ramli (2010) in
Malaysia obtained from companies, there is a significant and positive relationship between the share ratio of the
second largest shareholder and dividend. In other words, growth of the ratio of shares owned by the second largest
shareholder increases the dividend payout ratio.
The third-largest shareholder has the third largest share among the partners. When ranked from top to
bottom according to the shares of the stakeholders, one that islocated in the third place from the top. Studies of
Maury and Pajuste (2002) in Finland and the Berezinets et al. (2014) in Russia concluded that there is a significant and
negative relationship between the share ratio of the third largest shareholder and dividend. In other words, growth of
the ratio of shares owned by the third largest shareholder decreases the dividend payout ratio. If a company presents
its capital market shares for fund, this is called public flotation. With this method, which provides direct funding, a
company can assure funding by selling a portion of the existing shares in the capital market. When a company sells its
shares in the capital market rate, it is called as free float rate.
Studies of Wei and Xiao (2009) in China and Thanatawee(2013) in Thailand concluded that there is a
significant and negative relation between the free float rate and dividend. In other words, as the percentage of free
float rate increases, dividend payout ratio reduces. According to the Abbasiyan and La Lbar(2013) studies in Tehran, it
is concluded that there is a negative relationship between free float rate and dividend. However, this result is not
statistically significant.
The ownership concentration concept corresponds to the distribution rate of shares for individual or
corporate shareholders of the companies. However, it does not provide information about the structure of ownership.
As the ownership concentration concept is insufficient to explain the concept of ownership structure, we will
combine ownership concentration and ownership composition variables in our study. Ownership composition points
out the shareholders of the enterprise as individual or corporate. In our study, ownership composition variable
composes of managerial and foreign ownership concepts. For this reason, test studies regarding the relationship of the
dividends between these variables are mentioned below.
If a shareholder takes part in the top management of the company, managerial ownership can be the subject.
According to the result of the studies of Agrawaland Jayaraman (1994) in the United States; Stouraitisand Wu (2004)
in Japan; Karathanassis and Chrysanthopoulou(2005) in Greece; Holmen et al. (2008) in Sweden; Farinha and
Foronda (2009) in the United States; United Kingdom and Ireland; Hommel (2011) in Netherlands; Houcine andAjina
(2013) in France,there is a significant and negative relationship between managerial ownership and dividend. In other
words as the managerial ownership increases, dividend payout ratio on decreases. However, according to the results of
studies of Kumar (2006) in India; Hardjopranoto(2006) in Indonesia; Huda and Abdullah (2013) in Bangladesh;
Jojadeh and Pouraghajan (2014) in Tehran; Vo and Nguyen (2014) in Vietnam and Uwalomwa et al. (2015) in Nigeria,
there is a significant and positive relationship between managerial ownership and dividend. In other words, growth of
managerial ownership in companies increases dividend payout ratio. According to the study of Mehrani et al.(2011) on
Iran origin companies, there is no statistically significant relationship between managerial ownership and dividend.
Foreign ownership company means there is a foreign shareholder in a company. If there is another
shareholder residing in the company’s operated country, in this case concept of foreign shareholder may be referred.
According to the studies of Baba (2009) in Japan; Chai (2010) in Korea;Ullahet et al.(2012) in Pakistan and Dandagoet
al. (2015) in Nigeria; the relationship between foreign ownership and dividend is statistical significant and positive. In
other words, growth foreign ownership in a company, increases dividend payout ratio.
22 Journal of Economics and Development Studies, Vol. 3(4), December 2015

According to the result of the studies of Lamet et al. (2012) obtained from the businesses that operate in
China, there is a statistically significant and negative relationship between foreign ownership and dividend. In other
words, the increase in foreign ownership reduces the dividend payout ratios. According to the studies of Kumar
(2006) in India; Bogonko (2013) in Kenya and Vinh (2014) in Vietnam, there is not a statistically significant
relationship between foreign ownership and dividend.
3. Data, Methods and Hypotheses
Companies have been selected among publicly-traded companies in Istanbul Stock Exchange. A total of 271
companies’ data has been carefully collected which operate in the real and banking sectors between the years of 2004-
2011.The idea here is to get reliable results by examining the dividend payout of the firms that have different
ownership structures. Consequently, 2168 data are analyzed of these 271 companies for 8-year data (271 x 8). These
data are collected from the Istanbul Stock Exchange's official web site and public information published in Public
Disclosure Platform.
Different data sets can be used in econometric research. These obtained data sets can be described with the
model in accordance with structure. The impact of ownership structure on dividend is observed by panel data analysis
as can also be seen in the work of Karathanassis and Chrysanthopoulou(2005), Ramli (2010), Hommel (2011),
Abbasiyan and Lbar (2013), Bogonko (2013) and Jojadeh and Pouraghajan (2014).
Panel data analysis is a research method that enables economic relations to be measured, time series data and
cross-sections are combined. In our research, we brought together time series with the data section, thus, a data set
has been created where a combination of both time and cross-section data was used. It covers time data from 2004-
2011, cross section data consists of 271 companies.
The ownership structure concept in our study is discussed by two variables including "the ownership
concentration" and "the ownership composition". Ownership concentration focus on the individual or corporate
shareholders’ proportion of shares they own in the distribution of shares of the company. Whereas ownership
composition determines the individual and enterprise shareholders, in other words, the identity of the
shareholders(whether there are managerialor foreign shareholders in companies).
In our study, effect of “Ownership concentration” and “ownership composition” concepts on dividend
payout ratio rate will be observed with the help of control variables such as Earnings Per Share (EPS), Number of
Members of The Board of Directors (NOD), Return on Assets(ROA).Therefore, following hypotheses are
recommended:
Hypothesis 1: Dividends payments are a function of “ownership concentration”. Therefore, increase in ownership
concentration triggers increase in dividend payments.
Dividend: f (Earnings Per Shareit, Board Members Numberit, Return on Assetsit, Ownership Concentrationit)
Hypothesis 2: Different “ownership compositions" has different distinctive features. These features also affect
payments for dividends.
Dividend: f (Earnings Per Shareit, Board Members Numberit, Return on Assets it, Ownership Concentrationit)
Sakinc & Gungor 23

Table.1. Variables Used In the Model

Variables Definitions Calculation Type
Dependent Variables
DIVD Dividend Payout Ratio Proportion of the nominal value of TL 1 for 1 unit net cash
paid dividend
Independent Variables
Ownership Concentration Variables
M1 The Largest Shareholder’s Ratio of the largest shareholder of a company from the
Ownership Ratio total shares
M2 The Second Largest Shareholder’s Ratio of the second largest shareholder of a company from
Ownership Ratio the total shares
M3 The Third-Largest Shareholder’s Ratio of the third shareholder of a company from the total
Ownership Ratio shares
FFR Free Float Rate The ratio of a company's publicly traded shares
Ownership Composition Variables
FO Foreign Ownership Dummy variable is “1” if a foreign shareholder exists in a
company, otherwise, a value of "0".
MO Managerial Ownership Dummy variable is “1” if the Chairman of the Board of
Directors has also the title of General Manager, otherwise,
a value of "0".
Control Variables
EPS EarningsPer Share Proportion of the average net profits of a company along
with total shares
NOD The Number of Members of The The total number of members in the Board of Directors of
Board Of Directors a company
ROA Return on Assets Proportion of average net profits of a company along with
total assets
4. Findings
The largest shareholder in all companies (M1) holds 45.37% of the shares on average according to the
ownership concentration variables descriptive statistics. As a result, it is not wrong to say that in terms of ownership
concentration (OWC) “largest shareholder has a high share in companies under analysis”. The second largest
shareholder of the ownership concentration variables has 9, 59% share in total partners, third-largest shareholder’s
ownership ratio is 2, 79%, free float rate is 38, 13%.
Table.2. Descriptive Statistics of Ownership Concentration Variables
M1 M2 M3 FFR
Mean 45.37 9.59 2.79 38.13
Standard Deviation 24.29 10.88 4.60 23.05
Minimum 0 0 0 0
Maximum 99.84 45.44 19.96 100
According to Table 3, there is a significant and positive correlation at the level of 1% between the largest
shareholder ownership ratio and dividend payout ratio (DIVD), there is a significant and negative correlation between
free float rate and dividend payout ratio (DIVD). There is not statistically significant correlation between ownership
ratio of the second and third-largest shareholder and DIVD.
24 Journal of Economics and Development Studies, Vol. 3(4), December 2015

Table 3: The Correlation Analysis Between Ownership Concentration Variables (OWC) and Dependent
Variable (DIVD)
Variables M1 M2 M3 FFR
DIVD 0.1238*** 0,0009 -0.0352 -0.1037***
Note: *** significant at the 1% level.
According to the foreign ownership variable descriptive statistics information, 22,69 % of 271 companies
have foreign shareholders and there are no foreign shareholders for 77,31%. In other words, about 61 of the
companies out of 271 have foreign shareholders, there are no foreign shareholders approximately 210 of the
companies.
According to the managerial ownership variables, another ownership composition, descriptive statistics
information, 5,67% of the total 271 companies Chairman of the Board has also the title of general manager, chairman
of the Board of Directors is not General Manager of 94,33% of the total 271 companies. In other words, same
person act as the General Manager and also Chairman of the Board of Directors in 15 companies of total 271
companies, whereas, in 256 of the companies general manager and chairman of board are different people.
Correlation of dependent variable dividend payout ratio (DIVD) and ownership composition (OCOM) variables can
be seen from the table 4 as following:
Table.4: The Correlation Analysis Between Ownership Composition (OCOM) Variables and Dependent
Variable (DIVD)
Variables FO MO
DIVD 0.0939*** 0.0366*
Note: ***, * significant at the 1% and 10% level, respectively.
According to Table 4, there is a significant and positive correlation at the level of 1% between dividend
payout ratio (DIVD) and foreign ownership, there is a significant and positive correlation at the level of 10% between
managerial ownership and dividend payout ratio (DIVD).When ownership concentration(OWC) and ownership
composition (OCOM) variables are discussed with ownership structure concept in this study, relationship between
ownership structure and dividend will be explained by these two concepts. Dividend variable will be expressed by the
dividend payout ratio (DIVD) in the analysis. Relationship of ownership concentration variables (M1, M2, M3, FFR)
with the dividend payout ratio (DIVD) are examined by the Panel data analysis method with the help of control
variables. Findings obtained as a result of these analyses are given in Table 5 as following:
Table 5: The Relationship between Ownership Concentration (OWC) and Cash Dividend Payout Ratio
(DIVD)
Dependent VariableDIVD
Variables Model 1 Model 2 Model 3 Model 4
Constant -0.5327915 -0.3426284 -0.3549107 -0.1676589
-2.70*** -1.89* -2.00** -0.86
M1 0.0042985
2.07**
M2 -0.0004192
-0.09
M3 0.0029725
0.35
FFR -0.0043275
-2.12**
EPS 0.1968362 0.1969574 0.1969818 0.1968937
30.48*** 30.46*** 30.46*** 30.49***
NOD 0.0800391 0.0814014 0.0813965 0.0792175
2.91*** 2.95*** 2.95*** 2.88***
ROA -0.0041236 -0.0041052 -0.0041213 -0.004188
-2.93*** -2.91*** -2.92*** -2.97***
R-squared 0.4573 0.4559 0.4548 0.4544
F-statistic 237.44*** 235.83*** 235.87*** 237.51***
Note: ***, **, * significant at the 1%, 5% and 10% level, respectively.
Sakinc & Gungor 25

According to the Table 5, in each of the four models there is a significant statistical result with the level of
1%. In addition, explanatory power of each of the four model description is about 45%.According to the results of
the analysis, there is a significant and positive relationship of 5% between the ownership of the largest shareholderand
dividend payout ratio (DIVD) in terms of ownership concentration(OWC) and relationship between the dividend. In
other words, as the share rate of the largest shareholder increases, dividend payout ratio also increases. Our obtained
conclusion is consistent with the results of Wallgren (2006), Ramli (2010), Daradkah and Ajlouni (2013), Thanatawee
(2013) and Thanatawee (2014). However,our conclusion differs from the results obtained through the studies of
Maury and Pajuste (2002) Gugler and Yurtoğlu (2003), Thomsen (2005), Renneboog and Trojanowski (2005),
Mancinelli and Özkan (2006), Chkir and Saadi (2007), Amoako-Aduvd, (2009), Vintila and Moscu (2012), and
Berezinets et al. (2014). Authors concluded that there is a negativerelationship between the ownership of largest
shareholder and dividend. In addition, our conclusion differs from the results of Bena and Hanousek (2006), Sharif et
al. (2010) and Dandago et al. (2015). Authors claim that there is not a statistically significant relationship between the
largest shareholder and dividend.
There is a significant and negative relationship of 5% level statistically between the free float rate, as another
ownership concentration (OWC) variable, and dividend. In other words, increase of free float rate, decreases dividend
payout ratio. Our obtained conclusion is consistent with the results of Wei and Xiao (2009) and Thanatawee (2013).
However, our results differ from Abbasiyan and La Lbar (2013) studies. Authors claim that there is not a statistically
significant relationship between the free float rate and dividend.
According to the other obtained results about ownership concentration, as the second shareholders’ share
increases in a company, dividend payout ratio decreases. However, this result is not statistically significant. Our
conclusion differs from the result of Maury and Pajuste (2002), Renneboog and Trojanowski (2005) and Berezinets et
al. (2014) studies. Authors concluded that there is a statistically significant and negative relationship between second
shareholder's ownership rate and dividend. In addition, our conclusion also differsfrom the results of Gugler and
Yurtoğlu (2003) and Ramli (2010).Authors found out that statistically there is a significant and positive relationship
between second shareholder's ownership rate and dividend.
According to the other obtained results about ownership concentration, as the third shareholders’ share
increases in a company, dividend payout ratio increases. However, this result is not statistically significant. Our
conclusion differs from the result of Maury and Pajuste (2002) and the Berezinets et al. (2014) studies. Authors
concluded that there is a statistically significant and negative relationship between third shareholder's ownership rate
and dividend.
There is a statistically significant and negative relationshipat the level of 1% between one of the control
variable "ROA” variable and "DIVD" variable. Due to the "ROA" variable coefficient is negative, there is a reverse
relationship. In other words, as the company’s return on assetsincreases, dividend payout ratio decreases. However,
our conclusion differs from the study result of Baba (2009), Wei and Xiao (2009), Chai (2010), Ramli (2010), Lam et
al. (2012),Houcine and Ajina (2013), Thanatawee (2013),Thanatawee (2014), Dandago et al. (2015). Authors believe
that there is a positive relationship between ROA and dividend.
There is a statistically significant and positive relationship at the level of 1% between other control variable as
"EPS” and “DIVD”. In other words, as the earningsper share increases, dividend payout ratio increases. However,
our conclusion differs from the results of Chkirand Saadi (2007). Authors believe that there is a negative relationship
between EPS and dividend. In addition, our conclusion differs from the results of Sharif et al. (2010) and Jojadeh and
Pouraghajan (2014). Authors claim that there is no significant relationship between EPS and dividend.
There is a statistically significant and positive relationship at the level of 1% between the last control variable
as "NOD” and “DIVD”. In other words, an increase in the number of members of the Board of Directors of a
company results in increased dividend payout ratio. Relationship between ownership composition (OCOM) variables
(FO and MO) and dividend payout ratio(DIVD)are discussed by two models we created. According to the results of
the analysis findings are reported at the Table 6 as the following.
26 Journal of Economics and Development Studies, Vol. 3(4), December 2015

Table 6: The Relationship Between Ownership Composition (OCOM) And Cash Dividend Payout Ratio
(DIVD)

Dependent Variable (DIVD)

Variables Model 1 Model 2
Constant -0.2677381 -0.3268301
-1.51 -1.85*
FO -0.3251226
-3.10***
MO -0.1460471
-1.15
EPS 0.1962337 0.1974629
30.41*** 30.48***
NOD 0.0806713 0.0795324
2.94*** 2.88***
ROA -0.0041058 -0.0040999
-2.92*** -2.91***
R-squared 0.4334 0.4569
F-statistic 239.43*** 236.32***
Note: ***, **, * significant at the 1%, 5% and 10% level, respectively.
There are statistically significant results obtained from both models as the Table 6 is observed. First model’s
explanatory power is approximately 43%, whereas, second model’s explanatory power is approximately 45%. There is
a statistically significant and negative relationship at the level of 1% between foreign ownership (FO) and dividend
(DIVD).In other words, existence of foreign ownership in companies reduces dividend payout ratio. Our obtained
conclusion is consistent with the results of Lam et al. (2012). However, our conclusion differs from the results of
Baba (2009), Chai (2010), Ullah et al. (2012), and Dandago et al. (2015).Authors claim that there is a statistically
positive relationship between foreign ownership and dividend. In addition, our conclusion differs from the results of
Kumar (2006), Bogonko (2013) and Vinh (2014). Authors claim that there is no statistically relationship between
foreign ownership and dividend.
According to the results, existence of the managerial ownership (MO) in companies reduces the dividend
payout ratio (DIVD). However, this result is not statistically significant. Our obtained conclusion is consistent with
the results of Mehrani et al. (2011). However, our conclusion differs from the results of Agrawal and Jayaraman
(1994), Stouraitis and Wu (2004), Karathanassis and Chrysanthopoulou(2005), Holmen et al. (2008), Farinha and
Foronda (2009), Hommel (2011) and HoucineandAjina (2013).Authors claim that there is a statistically and negative
relationship between managerial ownership and dividend. In addition, our conclusion differs from the results of
Kumar (2006), Hardjopranoto (2006), Huda and Abdullah (2013), Jojadeh and Pouraghajan (2014), Vo and Nguyen
(2014) and Uwalomwa et al. (2015).Authors claim that there is a statistically and positive relationship between foreign
ownership and dividend.
6. Discussion and Conclusion
According to the results of the analysis, there is a significant and positive relationship of 5% between the
ownership ratio of the largest shareholder, as one of the ownership concentration variables, and dividend. In other
words, as the largest shareholder’s share increases in companies, dividend payout ratio also increases. This situation
enables the largest shareholder to intervene the management decisions with the one share-one vote rule movement.
Moreover, largest shareholder can put pressure on managers and minority shareholders so that they will work hard
and perform efficient Project investment, thus, minimize the problem of agency cost which can occur for a variety of
reasons. This provides increased company profits. Increased profit of a company also increases dividend ratio.
Therefore, investors whose aim is obtain the dividends are able to perform their investment for largest shareholders
of companies with high ownership ratio.
Sakinc & Gungor 27

There is a significant and negative relationship of 5% level statistically between the free float rate, as another
ownership concentration variable and dividend. In other words, increase of free float rate in companies, decreases
dividend payout ratio. The reason for this situation is explained in the following way: Increase of free float rate will
stimulate the control of the manager. Having the power and authority, manager will try to secure his position. Rather
than company’s interest, manager will keep his very own interests at the forefront who will not encounter the risk of
being expelled from the company due to a failure. In this case, power of agency costs will increase costs arising from
the manager. Increased costs will affect the profit in a negative way. The fall of profit will result in decrease on
dividend payout ratio.
Companies with high free float rate have more undistributed profits due to their dispersed ownership
structure. These types of companies can use their retained earnings for growth. Therefore, investors aiming for
growth can direct their investments to the companies which have high free float rate. According to the other results
obtained regarding ownership concentration, there is no statistically significant relationship between the second largest
shareholder and third largest shareholder. According to the study regarding the relationship between the control
variables and dividend, it is statistically significant and negative at the level of 1%.In other words, as the company’s
active profitability increases, dividend payout ratio decreases. So it is not to wrong to say that as the companies have
return of assets increases as a result of profits from the invested assets, it encourages business management to invest
again in different fields. Therefore, obtained profit partially or completely transferred to new investments instead
dividend payment.
There is a statistically significant and positive relationship at the level of 1% between other control variable as
"EPS” and dividend. In other words, as the earnings per share increase, dividend payout ratio increases. The higher is
the profit, the higher is the dividend. Therefore, businesses’ dividend rate is directly proportional to the profit. There
is a statistically significant and positive relationship at the level of 1% between the last control variable as "NOD” and
dividend. In other words, an increase in the number of members of the Board of Directors of a company results in
increased dividend payout ratio. As the board of directors of the firms examined, it can be said that they are generally
formed by the company shareholders. When different high percentage shareholders come together and establish a
new company this leads the increase in the number of the members of board of directors. Company shareholders'
preference of distributing the profit to the shareholders is also consistent with the “Bird- in- Hand Theory “in
financial literature. According to Gordon and Lintner, think that dividends to be paid to investors are more
guaranteed than the dividend used for the company's growth. The future is uncertain and contains risks. Losing the
current dividend in order to bring more gain makes current dividend more attractive. In this study, same deduction is
made as the “Bird- in- Hand Theory” which points out the risk of losing the current profit for a better return. There is
a significant and negative relationship at the level of 1% between foreign ownership, as one of the ownership
composition variables and dividend. According to the obtained result, increased foreign ownership cause a reduction
in dividend payout ratio. Companies including foreign shareholders have strategic advantages in competitive sectors.
Values that are brought by foreigner shareholders provide advantages for enterprises.
According to our outcome, foreign shareholders prefer not to distribute these profits to their shareholders or
distribute only low amount and use retained earnings for investment. Therefore, low dividend distribution between
shareholders is in question. Consequently, investors who aim to increase in size can invest on companies that have
high rate of foreign ownership. According to the other obtained outcome, as the managerial ownership increases,
dividend payout ratio reduces. However, this result is not statistically significant. As result of our study, we can say
that ownership structure has an effect on dividend. Shareholders should pay attention to this issue while they take
dividend decisions. In addition, potential investors should consider the ownership structure of the companies they
plan to invest in share which will be useful for their future.
28 Journal of Economics and Development Studies, Vol. 3(4), December 2015

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