Agency Conflicts and Corporate Payout Policies: A Global Study
Söhnke M. Bartram
London Business School - Department of Finance; Warwick Business School - Department of Finance
Philip R. Brown
University of Western Australia - Department of Accounting and Finance; University of New South Wales - Australian School of Business; Lancaster University - Department of Accounting and Finance; Financial Research Network (FIRN)
Janice C. Y. How
Queensland University of Technology; Financial Research Network (FIRN)
Queensland University of Technology - Faculty of Business; Financial Research Network (FIRN)
March 13, 2012
We investigate the roles of firm and country level agency conflicts in determining corporate payout policies. Based on a large sample of 29,610 firms in 43 countries from 2001 to 2006, we find that in high protection countries, investors are able to use their legal powers to extract cash from firms but their ability to do so can be substantially hindered when agency costs at the firm level are high. In poor protection countries, investors can seek refuge in firm level governance mechanisms to curb agency conflicts, suggesting a substitution between country and firm level investor protection. Finally, compared to repurchases, we find dividends are more likely to be the sole method of payout in high protection countries and in less closely held firms.
Number of Pages in PDF File: 49
Keywords: Dividends, share repurchases, agency costs, payout choice
JEL Classification: G3, F4, F3working papers series
Date posted: March 6, 2008 ; Last revised: March 14, 2012
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