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Creditor rights and the outcome model of dividends

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  • Byrne, Julie
  • O’Connor, Thomas

Abstract

Using 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.

Suggested Citation

  • Byrne, Julie & O’Connor, Thomas, 2012. "Creditor rights and the outcome model of dividends," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 227-242.
  • Handle: RePEc:eee:quaeco:v:52:y:2012:i:2:p:227-242
    DOI: 10.1016/j.qref.2012.04.002
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    Cited by:

    1. repec:eee:intfin:v:49:y:2017:i:c:p:154-172 is not listed on IDEAS
    2. Claudiu Botoc & Cosmin Enache, 2013. "Underinvestment Problem: Romanian Evidence," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 1-20.
    3. repec:eee:intfin:v:52:y:2018:i:c:p:227-239 is not listed on IDEAS
    4. repec:eee:ecmode:v:64:y:2017:i:c:p:502-512 is not listed on IDEAS
    5. Byrne, Julie & O’Connor, Thomas, 2017. "Creditor rights, culture and dividend payout policy," Journal of Multinational Financial Management, Elsevier, vol. 39(C), pages 60-77.
    6. Gonzalez, Maximiliano & Molina, Carlos A. & Pablo, Eduardo & Rosso, John W., 2017. "The effect of ownership concentration and composition on dividends: Evidence from Latin America," Emerging Markets Review, Elsevier, vol. 30(C), pages 1-18.
    7. repec:eee:finana:v:56:y:2018:i:c:p:93-111 is not listed on IDEAS
    8. Thomas O'Connor & Julie Byrne, 2017. "How do creditors respond to disclosure quality? Evidence from corporate dividend payouts," Economics, Finance and Accounting Department Working Paper Series n278-17.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

    More about this item

    Keywords

    Dividend policy; Creditor rights; Shareholder rights; Corporate governance;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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