Purpose: The purpose of this paper is to examine the influence of ownership structure and dividend payouts over firm’s profitability, valuation and idiosyncratic risk. The authors further investigate if corporate performance is sector dependent. Design/methodology/approach: The study employs signaling and bankruptcy theories to evaluate the influence of ownership structure and dividend payout over a firm’s corporate performance. The authors use a panel regression approach to measure the performance of family owned firms against that of widely held firms. Findings: The study confines to firms operating out of emerging markets. The results show that family owned firms are dominant with concentrated ownership. The management pays lower dividend leading to lower valuation and higher idiosyncratic risk. The study further illustrates that family ownership concentration and family control both influence firm performance and level of risk. The findings indicate that information asymmetry and under diversification lead to increased idiosyncratic risk, resulting in the erosion of firm’s value. Results also confirm that firms paying regular dividends are less risky and, hence, command a valuation premium. Originality/value: The evidence supports the proposition that information asymmetry plays a significant role in explaining dividend payouts pattern and related impacts on corporate performance. The originality of the paper lies in factoring idiosyncratic risk while explaining profitability and related valuation among emerging market firms.

The article analyses inter-dependencies between dividend, capital structure, and cost of capital, factoring the ownership structure of listed firms in India, using 3SLS system approach. The study finds that family firms are dominant with concentrated ownership. Dividend, leverage, and average cost of capital are inter-linked. However, family firms pay lower dividends, consistent with family owners extracting rent from external minority shareholders. Additionally, these firms have high leverage and lower cost of capital, suggesting that family control (reputation) provides intangible value to the firms. Ownership structure plays a critical role in understanding the policy decisions in emerging markets.

This article examines the impact of ownership structure and dividend payouts on idiosyncratic risk and market liquidity using agency, signaling, and bankruptcy theories from an emerging market perspective. The evidence shows that family firms dominate and have concentrated ownership, and dividend payouts are lower among family firms than their counterparts. The idiosyncratic risk is high among firms with higher family ownership concentration. The family ownership concentration and control positively influence the (firm) risk, dividends positively affect the market liquidity, and risk relates negatively to the market liquidity, supporting the entrenchment of the minority shareholders’ proposition that a significant payout leads to a decrease in information asymmetry and a lower level of risk. The study further supports the proposition that information asymmetries are central to elucidating the dynamics of dividend payouts and their effects on firm risk and market liquidity. The evidence confirms that family ownership concentration affects policy decisions, especially ownership control. The paper’s originality lies in factoring ownership concentration when analyzing how payouts affect firm risk and market liquidity from an emerging markets perspective where controlling shareholders enjoy substantial private benefits, whereas minority shareholders have limited protection.