Shareholder and Creditor Legal Rights and the Outcome Model of Dividends

39 Pages Posted: 16 Jan 2012  

Thomas O’Connor

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics

Julie Byrne

Dublin City University

Date Written: January 15, 2012

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

JEL Classification: G15, G35

Suggested Citation

O’Connor, Thomas and Byrne, Julie, Shareholder and Creditor Legal Rights and the Outcome Model of Dividends (January 15, 2012). Available at SSRN: https://ssrn.com/abstract=1985539 or http://dx.doi.org/10.2139/ssrn.1985539

Thomas O'Connor (Contact Author)

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics ( email )

County Kildare
Ireland

Julie Byrne

Dublin City University ( email )

Ireland 9
Dublin 9, leinster 9
Ireland

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