Blockholder leverage and payout policy: Evidence from French holding companies

Sereeparp Anantavrasilp, Abe de Jong, Douglas V. DeJong*, Ulrich Hege

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)


This paper focuses on dominant owners’ use of leverage to finance their blockholdings and its relationship to dividend policy. We postulate that blockholder leverage may impact payout policy, in particular when earnings are hit by a negative shock. We use panel data for France where blockholders have tax incentives to structure their leverage in pyramidal holding companies and study the effect of the financial crisis in 2008/2009. We find no difference in payout policy and financial behavior during the 1999 to 2008 period between firms with levered owners and other firms. However, in the years 2009 to 2011 following the crisis, dividend payouts increase in proportion to pyramidal debt of dominant owners. We inspect pyramidal entities individually and find that on average only 60% of dividends are passed through to the ultimate owners, with the rest predominantly used to meet debt service obligations of the pyramidal entities.

Original languageEnglish
Pages (from-to)253-292
Number of pages40
JournalJournal of Business Finance and Accounting
Issue number1-2
Publication statusPublished - 1 Jan 2020

Bibliographical note

Funding Information:
The authors are grateful for helpful comments from Nittai Bergman, Eli Berkovitch, Henrik Cronqvist, Ingolf Dittmann, Edith Ginglinger, Ronen Israel, Meziane Lasfer, Erik Lie, Roni Michaely, Giovanna Nicodano, Urs Peyer, Kristian Rydqvist, T.J. Wong, and Yishay Yafeh and from an anonymous referee, as well as from seminar participants at Aalto, CUHK, ESMT, HEC Paris, IDC Herzliya, Tilburg University, and at various conferences. An earlier version (based on a different sample period prior to the global financial crisis) was circulating under the title ?Blockholders and Leverage: When Debt Leads to Higher Dividends?. The authors acknowledge excellent research assistance from Mounir Bendouch. Douglas DeJong thanks the Rotterdam School of Management, Erasmus University and CentER, Tilburg University for their support. Ulrich Hege thanks the European Research Council, ERC FP7 grant No. 312503-SolSys, the ANR, grant ANR-17-EURE-0010 under the Investissements d'Avenir program, and TSE-P for funding.

Publisher Copyright:
© 2019 John Wiley & Sons Ltd


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