Shareholder and Creditor Legal Rights and the Outcome Model of Dividends
National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics
Dublin City University
January 15, 2012
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.
Number of Pages in PDF File: 39
Keywords: Dividend policy, creditor rights, shareholder rights, corporate governance
JEL Classification: G15, G35
Date posted: January 16, 2012
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