Nonfinancial Firms as Large Shareholder Use Dividend Policy for Management Monitoring in Brazil




Dividend policy, Management monitoring hypothesis, Ownership structure, Nonfinancial firm as dominant blockholder, Brazil


The paper analyzes whether nonfinancial firms as large blockholders of the Brazilian firm shape dividend policy. Under the Agency Theoretical framework a set of good corporate governance practices is suggested as able to control management activity and prevent managers from incurring in moral hazard problems and the emergence of excessive management power as predicted by the Managerial Power Hypothesis. In this context, the Management Monitoring Hypothesis proposes that dividend policy may be used as a management control mechanism given that dividend distribution affects the free cash flow available for managers. Dividend models were estimated by the Generalized Method of Moments (GMM) for an unbalanced panel data, composed of 1.890 firm-year observations of 234 companies listed on the BM&FBovespa, in the period 1996-2012. The results indicate that nonfinancial firms as large shareholders increase dividend payout which leads to the reduction of free cash flow. This result is in accordance with the monitoring hypothesis which predicts the reduction of free cash flow available for managers through dividend policy.


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Author Biographies

Vicente Lima Crisóstomo, Universidade Federal do Ceará

Professor do Depto de Ciências Contábeis/FEAAC/Universidade Federal do Ceará. Áreas de interesse: Finanças Corporativas, Responsabilidade Social Corporativa, Governança Corporativa, Investimento Empresarial, Estrutura de Propriedade, Avaliação de Empresas. Doutorado em Economia Financeira pela Universidade de Valladolid/Espanha. Mestre em Ciências da Computação pela Universidade Federal de Santa Catarina. Graduado em Ciências Contábeis e Ciências da Computação pela Universidade Federal do Ceará.

José Wellington Brandão, PETROBRÁS/UFC

Mestre em Administração e Controladoria pela Universidade Federal do Ceará, Bacharel em Administração de empresas pela Universidade de Fortaleza (2002). MBA em Logística Empresarial pela FGV. Licenciando em Matemática pela UFC. Administrador Pleno - Petróleo Brasileiro - Ceará.


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How to Cite

Crisóstomo, V. L., & Brandão, J. W. (2018). Nonfinancial Firms as Large Shareholder Use Dividend Policy for Management Monitoring in Brazil. Future Studies Research Journal: Trends and Strategies, 10(1), 109–131.