This study examines the impact of multiple large shareholders (MLS) on a firm’s dividend payouts in a low-investor protection regime, India, where minority shareholders’ expropriation concerns are severe and firms have an incentive to build a capital market reputation. Therefore, we purport for the prevalence of the substitution hypothesis, whereby MLS cooperate in paying larger dividends to assuage expropriation concerns for reputation-building. The empirical analysis using non-financial firms with MLS listed on NIFTY 500 from 2009 to 2019 yields that both the controlling owner and MLS positively influence dividend payout intensity. Additional analyses also demonstrate that the positive effect of MLS is prominent in growing firms that undertake equity issuances and firms with lower board independence. We also find that firms make relatively lower payouts when an institutional investor is the second largest shareholder. Further, it is shown that MLS engage in greater dividend smoothing. Lastly, it is observed that dividends are more valuable for firms with higher MLS ownership. Altogether, these findings support the substitution hypothesis.

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Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License



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