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How do creditors respond to disclosure quality? Evidence from corporate dividend payouts

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  • Byrne, Julie
  • O'Connor, Thomas

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.

Suggested Citation

  • Byrne, Julie & O'Connor, Thomas, 2017. "How do creditors respond to disclosure quality? Evidence from corporate dividend payouts," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 49(C), pages 154-172.
    • Handle: RePEc:eee:intfin:v:49:y:2017:i:c:p:154-172
    DOI: 10.1016/j.intfin.2017.04.002
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    2. Ed-Dafali, Slimane & Patel, Ritesh & Iqbal, Najaf, 2023. "A bibliometric review of dividend policy literature," Research in International Business and Finance, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Dividend payout; Creditor rights; Disclosure standards; Agency outcome and substitution model of dividends;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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