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Dividend payout, corporate governance, and the enforcement of creditor rights in emerging markets

  • Thomas O'Connor

    ()

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

In this paper I examine the relationship between the strength of creditor rights, their enforcement, corporate governance and corporate dividend payout in a sample of 281 emerging market firms. I show that the outcome model of dividends, which states that corporate dividend payout increases in the strength of corporate governance, holds in emerging markets, but only where the legal enforcement of creditor rights is strong. Where legal enforcement is weak, the shareholders of better-governed firms are not able to use their legal rights to extract large dividends from firms. The shareholders of better-governed firms are unable to extract large dividends from firms irrespective of the strength of creditor rights. That is, differences in creditor rights are not systematically related to dividend payout in the way predicted by the agency costs of debt and equity version of the outcome model of dividends.

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File URL: http://repec.maynoothuniversity.ie/mayecw-files/N227-12.pdf
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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 n227-12.pdf.

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Length: 24 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:may:mayecw:n227-12.pdf
Contact details of provider: Postal:
Maynooth, Co. Kildare

Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://www.maynoothuniversity.ie/economics-finance-and-accounting

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  1. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 2000. "Investment-Cash Flow Sensitivities are Useful: A Comment on Kaplan and Zingales," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 695-705.
  2. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
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