This paper investigates the influence of core agency problem within family-controlled firm on its dividend policy. We proposed and tested two competitive hypotheses: the self-disciplined hypothesis (family-controlled will pay higher dividend in order to reduce cost of external financing) and the agency-cost hypothesis (family shareholder will expropriate minority shareholders by paying less cash dividend). The empirical results show that cash dividend payout by family-control firms are significantly lower than that of non-family-controlled firms. The cash dividend payout of family-controlled firms will be further lower if small proportions of its shares were hold by insider or institution investors. All these results support the agency-cost hypothesis.
