Exploring the interplay between tax avoidance, dividend policy andfamily ownership

Purpose The purpose of this study is to examine and better understand how tax avoidance practices affect dividend payout policy, particularly in family-owned firms. Design/methodology/approach The sample includes 3,732 firm-year observations of 311 French firms from 2011 to 2022. The authors use panel data regression based on the Prais−Winsten regression to examine how tax avoidance affects dividend payout. Findings The results show that tax avoidance is positively associated with dividend payout policies. More importantly, the authors find that family ownership exacerbates this positive relationship. These results suggest that family firms may be more inclined to channel tax savings directly into dividend distributions to benefit family shareholders and signal the firm’s financial health and stability to investors. Research limitations/implications This study examines only the French context, which restricts the generalizability of the results. Practical implications The findings provide important insights for investors and policymakers. Investors in family-owned firms should be aware of their tendency to distribute tax savings as dividends rather than reinvest them. Policymakers might encourage firms to reinvest savings in innovation or growth initiatives to promote more balanced economic benefits. Originality/value This study builds upon prior research by investigating how family-owned firms’ specific behaviors influence the link between tax avoidance and dividend policy.