Shareholder and creditor legal rights and the outcome model of dividends

Thomas O'Connor () and Julie Byrne ()
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Julie Byrne: Department of Economics Finance and Accounting, National University of Ireland, Maynooth

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: In a sample of 22,374 firms from 35 countries, we examine the role of creditor rights, shareholder rights, and corporate governance in determining corporate dividend policy. We find that, while all three variables play a significant role in determining both the likelihood and the dividend amount, the effect of country-level creditor rights dominate. In subsequent analysis, we show that the outcome model is most effective in countries with strong creditor rights. When creditor rights are weak, creditors demand, and firms consent to lower dividends. These findings show that creditors, and not shareholders, exert the greatest influence over corporate dividend policy.

Keywords: Dividend policy; creditor rights; shareholder rights; corporate governance. (search for similar items in EconPapers)
JEL-codes: G15 G35 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012
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Citations: View citations in EconPapers (15)

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