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Shareholder and creditor legal rights and the outcome model of dividends

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  • Thomas O'Connor

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

  • Julie Byrne

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

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.

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Bibliographic Info

Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n225-12.pdf.

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Length: 39 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:may:mayecw:n225-12.pdf

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Keywords: Dividend policy; creditor rights; shareholder rights; corporate governance.;

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