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Agency Problems and Dividend Policies Around the World

  • Rafael La Porta
  • Florencio Lopez-de-Silane
  • Andrei Shleifer
  • Robert Vishny

This paper addresses the question of why firms pay dividends, the so-called outline two agency models of dividends. On what we call outcome minority shareholders to force corporate outsiders to disgorge cash. Under this model, stronger minority shareholder rights should be associated with higher dividends. On what we call substitute a reputation for decent treatment of minority shareholders so that firms can raise equity finance in the future. Under this model, stronger minority shareholder rights reduce the need for establishing a reputation, and so should be associated with lower dividends. We compare these models on a cross-section of 4,000 companies from around the world, which operate in 33 countries with different levels of shareholder protection, and therefore different strength of minority shareholder rights. The findings on payout levels and other results support the outcome agency model of dividends.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6594.

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Date of creation: Jun 1998
Date of revision:
Publication status: published as Journal of Finance, Vol. 55, no. 1 (February 2000): 1-34.
Handle: RePEc:nbr:nberwo:6594
Note: CF
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