Creditor Rights, Culture and Dividend Payout Policy
40 Pages Posted: 10 Dec 2014
Date Written: December 8, 2014
We study how creditor rights and culture interact with one another and influence corporate dividend payout policy. We identify two distinct substitution effects. First, creditors substitute poor legal standing with lower dividends, but only in countries defined as either individualist or with low levels of uncertainty avoidance. Second, creditors substitute poor creditor rights for “creditor friendly” culture, which is the culture in countries defined as either collective or with high levels of uncertainty avoidance. Our findings suggest that creditors exert a sizable influence over corporate dividend policy, and they do so after accounting for both the strength of creditor rights and the nature of the cultural tradition which prevails in each country.
Keywords: National culture, creditor rights, dividend policy.
JEL Classification: G34, G35
Suggested Citation: Suggested Citation