Managerial ownership and dividend policy during Covid-19: evidence from Euro Stoxx 50 firms

Abstract

This study examines how managerial ownership affects dividend policy among large European listed firms and whether this relationship changed during the Covid-19 pandemic. Drawing on agency theory and the view that dividends and ownership may function as substitute or complementary governance mechanisms, we analyse a panel of 38 non-financial Euro Stoxx 50 firms over 2013–2023 using instrumental-variable and panel regressions with firm- and year-level controls. The results show a positive and statistically significant association between managerial ownership and dividend payouts. This effect is stronger at lower levels of managerial ownership and does not support the non-monotonic relationship predicted by entrenchment theories for the full sample, although industry-level analyses suggest some heterogeneity. Covid-19 had no direct effect on dividend payouts but strengthened the positive association between managerial ownership and dividends, a finding robust to alternative definitions of the pandemic period. These results suggest that managerial ownership and dividends operate primarily as complementary governance mechanisms in large European blue-chip firms, particularly during periods of uncertainty. The study contributes to the ownership-dividend literature by providing evidence from a European civil-law setting and by documenting how this governance relationship evolved during the Covid-19 shock. An external validity analysis confirms the robustness of the positive ownership-dividend relationship