Blockholdings, dividend policy, stock returns and return volatility : evidence from the UAE

This paper examines the relationship between the presence of blockholdings and stock returns and return volatility in the United Arab Emirates. Earlier studies report mixed results for the direction of the relationships across both developed and emerging markets. This study focuses specifically on these relationships in a dividend policy framework. This study further investigates the role of blockholder type by distinguishing between government, individual and corporate blockholders. Our results indicate that blockholder ownership reduces stock return volatility for both non-dividend-paying and dividend-paying stocks, does not impact returns and is not perceived as expropriating the wealth of other investors. We also conclude that the blockholders do not exhibit rent-seeking behavior through the extraction of dividends and investors in UAE firms embrace the role of blockholders and the reinvestment of profits.