Document Type

Journal Article

Department/Unit

Department of Finance and Decision Sciences

Title

Dividend policy: Balancing shareholders' and creditors' interests

Language

English

Abstract

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.

Publication Date

2013

Source Publication Title

Journal of Financial Research

Volume

36

Issue

1

Start Page

43

End Page

66

Publisher

Wiley

DOI

10.1111/j.1475-6803.2013.12002.x

ISSN (print)

02702592

ISSN (electronic)

14756803

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