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Spillover effects of creditor rights on corporate payout policy

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  • Najah Attig
  • Paul Brockman
  • Mohammad Rahaman

Abstract

We use exogenous changes in creditor rights from staggered enactments of anti‐recharacterization laws to show that enhanced creditor rights lead to economically significant increases in dividend payments. This impact is more pronounced for firms that are financially constrained, poorly governed, informationally opaque, and prone to agency problems. Our detailed loan‐contract results show that stronger creditor rights provide greater access to credit markets, and it is through this channel that firms are able to redirect more funds toward shareholder payouts. Overall, our findings suggest that improving the rights of one stakeholder can create positive spillover effects for other stakeholders.

Suggested Citation

  • Najah Attig & Paul Brockman & Mohammad Rahaman, 2025. "Spillover effects of creditor rights on corporate payout policy," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 48(4), pages 1609-1643, December.
    • Handle: RePEc:bla:jfnres:v:48:y:2025:i:4:p:1609-1643
    DOI: 10.1111/jfir.70000
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