DIVIDEND POLICY: BALANCING SHAREHOLDERS' AND CREDITORS' INTERESTS: Dividend Policy

Citation data:

Journal of Financial Research, ISSN: 0270-2592, Vol: 36, Issue: 1, Page: 43-66

Publication Year:
2013
Usage 1437
Abstract Views 826
Full Text Views 590
Link-outs 21
Captures 75
Exports-Saves 58
Readers 17
Citations 12
Citation Indexes 12
Repository URL:
https://repository.hkbu.edu.hk/hkbu_staff_publication/1869
DOI:
10.1111/j.1475-6803.2013.12002.x
Author(s):
Shao, Liang; Kwok, Chuck C.Y.; Guedhami, Omrane
Publisher(s):
Wiley-Blackwell; Wiley
Tags:
Business, Management and Accounting; Economics, Econometrics and Finance
article description
Dividend policies provide an opportune setting to examine how firms simultaneously manage the diverging interests of shareholders and creditors. Dividends ease shareholders' concerns about expropriation by insiders while exacerbating creditors' concerns about expropriation by shareholders. Firm insiders should set dividend policies to minimize the agency costs of equity and debt. Using a sample of 39 countries for 1991-2010, we find strong evidence that dividends are more positively sensitive to creditor (shareholder) rights when shareholders (creditors) are adequately protected. Our research emphasizes the importance of accounting for the interactions between both agency relationships when studying corporate policies. © 2013 The Southern Finance Association and the Southwestern Finance Association.