Departure of giants: ownership transition in lone-founder owned firms

Purpose: The characteristics of businesses change with the change in ownership structure of the business. This study examines the change in ownership structure of the firm after the departure of lone founders, and its influence on dividend payout decisions of the firm. Design/methodology/approach: The authors employed 4,302 firm-year observations of non-financial firms listed on Pakistan Stock Exchange over the period 2007–2021. To test the hypotheses, the authors employed ordinary least squares regression, and additionally, generalized method of moments estimation and fixed effect analysis were applied to check for the robustness of results. Findings: Using the lens of agency theory and social identity theory, the authors report that the presence of lone founder (family owners) is negatively (positively) associated with dividend payout, however, transition of lone-founder ownership to family-owned and family-managed firm leads to more dividend payout, whereas its transition to family-owned and non-family-managed firm results in lesser dividend payments. Originality/value: This study provides novel insight into the strategic behavior of lone founders and extend the limited family business heterogeneity literature by examining the effects of ownership transition and its influence on firm's dividend payout decisions.