This study investigates the payout policy of state-owned municipal firms. Based on insights from agency theory we derive an empirically testable model based on Lintner's corporate dividend policy model accounting for the characteristics of state-owned firms in terms of corporate governance and ownership structure. Exploiting a large and new panel dataset on German firms from the years 2003 to 2014, we provide empirical evidence that the payout behavior of state-owned firms is similar to the payout policy of private sector firms. They engage in payout smoothing, and their payout policy is influenced by governance form and by ownership dispersion: The degree of payout smoothing is higher among private-law firms and it increases with ownership dispersion, in line with the predictions derived from agency theory. Against the background of an increasing economic importance of state-owned firms the results help to better understand their corporate governance and corporate finance.
Joint with Nicole Wägner (DIW Berlin & TU Berlin) and Maria Nieswand (Loughborough University)