How Do Creditors Respond to Disclosure Quality? Evidence From Corporate Dividend Payouts

Journal of International Financial Markets Institutions and Money, Vol. 49, pp. 154-172

36 Pages Posted: 13 Apr 2020

See all articles by Julie Byrne

Julie Byrne

Dublin City University

Thomas O’Connor

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

Date Written: March 17, 2020

Abstract

Using a sample of 17,544 firms from 28 countries we explore how creditors influence dividend payouts in various disclosure regimes. Poorly-protected creditors do not restrict the practice by firms in opaque regimes of using large dividend payouts to build reputation capital, and place few restrictions on dividend payouts in transparent regimes. In intermediate disclosure regimes creditors place large restrictions on dividend payouts. Dividend payouts are always largest in transparent regimes. Our findings say that the disclosure standards versions of the outcome and substitution agency models of dividends are not mutually-exclusive, and are as effective under weak as they are under strong creditor rights.

Keywords: Dividend payout, creditor rights, disclosure standards, agency outcome and substitution model of dividends.

JEL Classification: G30; G35.

Suggested Citation

Byrne, Julie and O'Connor, Thomas, How Do Creditors Respond to Disclosure Quality? Evidence From Corporate Dividend Payouts (March 17, 2020). Journal of International Financial Markets Institutions and Money, Vol. 49, pp. 154-172, Available at SSRN: https://ssrn.com/abstract=3555847

Julie Byrne

Dublin City University ( email )

Ireland 9
Dublin 9, leinster 9
Ireland

Thomas O'Connor (Contact Author)

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

County Kildare
Ireland

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