Creditor rights and the outcome model of dividends

Byrne, Julie; O’Connor, Thomas

doi:10.1016/j.qref.2012.04.002

Cited by 35 publications

(37 citation statements)

References 37 publications

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“…At the company level, they find a positive relationship between corporate governance quality and dividend payouts supporting the outcome hypothesis. Byrne and O'Connor (2012) show that creditor rights are more important than shareholder rights in determining the dividend policy and find empirical support for the outcome hypothesis in countries with strong creditor rights. However, in countries with weak creditor rights, companies pay out lower dividends regardless of the strength of shareholder rights.…”

Section: The Reputation Building (Substitution) and The Outcome Hypotmentioning

confidence: 62%

Dividend Payouts: Majority Control and Rent Extraction

Besim

Adaoglu

2018

Journal of Business Economics and Management

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In Eurasia, Turkey has a “crony” capitalist system with majority control and business groups (BGs) in the hands of a few families. These business groups are often organised around a holding company. We analyse the dividend payouts of family controlled Borsa Istanbul companies, which are affiliated to holding and non-holding BGs. We investigate and quantify the effects of several control-enhancing mechanisms (CEMs) on dividend payouts. We use precise quantitative proxies for CEMs to measure the divergence between control and ownership rights. Supporting the rent extraction hypothesis, holding business group companies have lower dividend payouts as the divergence between control and ownership rights widens and the pyramid wedge increases. However, controlling foreign-family coalitions in holding business group companies curb the rent extraction problem by having a positive effect on the dividend payouts. Overall, for family controlled holding BG companies, the effects of company-specific financial control variables on dividend payouts are stronger than the effects of CEMs. For family controlled non-holding BG companies, there is no empirical support for either the rent extraction or the reputation building hypotheses. The company-specific financial control variables are the main determinants of dividend payouts for family controlled non-holding BG companies.

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Section: The Reputation Building (Substitution) and The Outcome Hypotmentioning

confidence: 62%

Dividend Payouts: Majority Control and Rent Extraction

Besim

Adaoglu

2018

Journal of Business Economics and Management

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“…We explore our data in the same manner and do not believe that our findings are governed by (abnormally) large dividend payouts in collectivist regimes. 9 The index is created by examining and rating companies' annual reports for their inclusion and exclusion of 85 items and ranges from 0 to 100 with 100 as the highest standard. 10 In a set of robustness tests which follow (see Tables 7 and 8), we show that our findings remain qualitatively the same when we use the revised anti-director rights measure in place of disclosure.…”

Section: Multivariate Regressionsmentioning

confidence: 99%

“…Where creditor rights are weak, managers cater to the demands of creditors for lower dividends (the substitution hypothesis). Where creditor and shareholders rights are strong, creditors permit large dividend payouts (see Byrne and O'Connor, 2012;and Shao et al, 2013). The second strand, the dividend-culture literature, explores the link between culture, an informal institution, and corporate dividend payout in a purely agency cost of equity setting.…”

Section: Introductionmentioning

confidence: 99%

Creditor rights, culture and dividend payout policy

Byrne

O’Connor

2017

Journal of Multinational Financial Management

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We study how creditor rights and culture interact with one another to influence corporate dividend payout policy. Where creditor rights are strong, creditors accept the status quo, which are large dividends in individualist and small dividends in collectivist traditions, respectively. Culture influences dividend payout where creditor rights are weak. In collectivist countries where group cohesion among corporate stakeholders results in perceived lower agency costs of debt and equity, creditors place few if any restrictions on dividend payout given weak creditor rights. In contrast, in individualist traditions, creditors continue to restrict dividend payouts under weak creditor rights. Our findings emphasize the importance of accounting for the interactions between creditor rights and culture in determining dividend policy.

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“…The authors of [5] followed up on this idea in article [22] and consider the dividend to be a substitute mechanism for relieving confl ict between shareholders and creditors. In their empirical research involving 35 countries around the world, the authors of [7] come to the conclusion that creditors have a greater infl uence on dividend politics than shareholders.…”

Section: Market Imperfectionsmentioning

confidence: 99%