Goyal, Jategaonkar, Megginson & Muckley: Whence the privatized firm dividend premium?


We find that the major determinants of the payout premium of firms after privatization are improved firm operating performance and a prevalence of agency costs which are mitigated by higher pay outs. We examine up to 82,612 firm-years (up to 409 privatized and 6,193 non-privatized firms) across 26 countries. The privatized firm payout premium increases substantively in civil law countries and is inversely related to the proportion of closely held shares. It also increases with firm earnings, efficiency and growth opportunities. Our main findings do not materially differ in respect to the international variation over time of the dividend tax penalty and across the state of economic development in the country of firm privatization but they are not evident in industry sectors with high levels of regulation. We therefore provide an economic rationale for the higher pay outs of privatized firms.

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