Effects of ownership structure and taxes on lodging firms’ dividend payout

The purpose of this study is to examine how institutional ownership, insider ownership, and taxes affect dividend payouts of lodging firms. The results of univariate tests and Tobit regressions show that dividend payouts of lodging firms are positively related to institutional holdings and negatively related to insider holdings. Contrary to prior expectations, taxes appear not to affect lodging firms’ dividend decisions. That is, dividend tax cut introduced by the 2003 tax reform did not cause our sample lodging firms to increase their dividend payments. In addition, neither the relationship between dividend payouts and institutional holdings nor the relationship between dividend payouts and insider holdings were significantly altered by the 2003 tax reform. The results suggest that both institutional holdings and insider holdings are important factors influencing lodging firms’ dividend decisions. Therefore, it is recommended that future studies investigating lodging firms’ dividend behavior take into account the impacts of institutional holdings and insider holdings. In addition, the seeming irrelevance of taxes found in this study suggests that investors’ tax considerations do not play an important role in shaping lodging firms’ dividend decisions. Therefore, some alternative approaches based on agency perspectives, information asymmetry, or transaction costs would provide a more appropriate framework for understanding lodging firms’ dividend behavior. Together with these theoretical implications, some practical implications for managers and investors are discussed in the conclusion.