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Agency Conflicts and Corporate Payout Policies: A Global StudySöhnke M. BartramWarwick Business School - Department of Finance Philip R. BrownUniversity 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. HowQueensland University of Technology; Financial Research Network (FIRN) Peter VerhoevenQueensland University of Technology - Faculty of Business; Financial Research Network (FIRN) March 16, 2009 Abstract: 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, F3 working papers seriesDate posted: March 17, 2009 ; Last revised: June 10, 2010Suggested CitationContact Information
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