Agency Problems and Dividend Policies Around the World

40 Pages Posted: 10 Jul 2000 Last revised: 9 Oct 2010

See all articles by Rafael La Porta

Rafael La Porta

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Florencio Lopez de Silanes

SKEMA Business School; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1998

Abstract

This paper addresses the question of why firms pay dividends, the so-called outline two agency models of dividends. On what we call outcome minority shareholders to force corporate outsiders to disgorge cash. Under this model, stronger minority shareholder rights should be associated with higher dividends. On what we call substitute a reputation for decent treatment of minority shareholders so that firms can raise equity finance in the future. Under this model, stronger minority shareholder rights reduce the need for establishing a reputation, and so should be associated with lower dividends. We compare these models on a cross-section of 4,000 companies from around the world, which operate in 33 countries with different levels of shareholder protection, and therefore different strength of minority shareholder rights. The findings on payout levels and other results support the outcome agency model of dividends.

Suggested Citation

La Porta, Rafael and Lopez de Silanes, Florencio and Shleifer, Andrei and Vishny, Robert W., Agency Problems and Dividend Policies Around the World (June 1998). NBER Working Paper No. w6594. Available at SSRN: https://ssrn.com/abstract=226317

Rafael La Porta (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Florencio Lopez de Silanes

SKEMA Business School ( email )

Avenue Willy Brandt, Euralille
Lille, 59777
France

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrei Shleifer

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-5046 (Phone)
617-496-1708 (Fax)

HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Robert W. Vishny

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-702-2522 (Phone)
312-702-0118 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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