Working Paper Cnr-Ceris, N° 06/2011 

Agency Issues in a Family Controlled Corporate Governance Structure
The Case of Italy

Nalinaksha Bhattacharyya†
Julie Ann Elston‡
Laura Rondi§

February 22, 2011

This study provides empirical evidence on the relationship between dividend payout ratios, executive compensation and agency costs in Italy. Corporate governance in Italy is distinguished by the fact that a large number of Italian firms are family controlled, which may theoretically reduce asymmetry of information and associated agency costs. Using a panel of listed manufacturing firms we find evidence that family control plays a significant role in resolving agency issues, i.e. that increases in family control of the firm lead to a higher dividend payout. Nevertheless, as we also find that managerial compensations are negatively related to dividend payout ratios, even in this family controlled environment, dividends do play their role in mitigating agency problems.

JEL CLASS.: G32, G35

KEYWORDS: Corporate Governance, Managerial Compensation, Dividends, Family Firms, Italy

† Nalinaksha Bhattacharyya, College of Business and Public Policy, University of Alaska
Anchorage, 3211 Providence Drive, Anchorage, AK 99508-4614, Tel: 907-786-1949, email:
Cet e-mail est protégé contre les robots collecteurs de mails, votre navigateur doit accepter le Javascript pour le voir

‡ Julie Ann Elston, College of Business, Oregon State University, 228 Cascades Hall, 2600
NW CollegeWay, Bend OR 97701-5998, Tel: 541-322-3165, email:
Cet e-mail est protégé contre les robots collecteurs de mails, votre navigateur doit accepter le Javascript pour le voir

§ Laura Rondi, Politecnico di Torino and Ceris-CNR, Corso Duca degli Abruzzi, 24, 10129
Torino, Italy, Tel. 39-011-5647232, email: Cet e-mail est protégé contre les robots collecteurs de mails, votre navigateur doit accepter le Javascript pour le voir

download