Dividend decisions in the property and liability insurance industry: Mutual versus stock companies

This article examines the effect of organizational forms on corporate dividend decisions by exploring the differences in dividend payout ratios between mutual and stock property-liability (P-L) insurers in the US. Our large sample evidence suggests: (1) mutual insurers tend to have a lower dividend payout ratio than stock insurers and the observed difference is about 4% points, holding other factors constant; (2) mutual insurers tend to adjust dividend payout ratios toward their long-run target levels more slowly than stock firms. These results are consistent with the capital constraints and/or greater agency costs of equity in mutual insurers. © Springer Science+Business Media, LLC 2008.