Location of Repository

Agency Conflicts and Corporate Payout Policies: A Global Study

By Söhnke M. Bartram, Philip Brown, Janice C.Y. How and Peter Verhoeven

Abstract

We investigate the roles of firm and country level agency conflicts in determining corporate payout policies. Based on a large sample of 29,610 firms in 43 countries from 2001 to 2006, we find that in high protection countries, investors are able to use their legal powers to extract cash from firms but their ability to do so can be substantially hindered when agency costs at the firm level are high. In poor protection countries, investors can seek refuge in firm level governance mechanisms to curb agency conflicts, suggesting a substitution between country and firm level investor protection. Finally, compared to repurchases, we find dividends are more likely to be the sole method of payout in high protection countries and in less closely held firms.Dividends; share repurchases; agency costs; payout choice; governance

OAI identifier:

Suggested articles

Preview

Citations

  1. (2007). Do U.S. firms have the best corporate governance? A cross country examination of the relation between corporate governance and shareholder wealth, Working Paper, European Corporate Governance Institute.
  2. (2003). Payout policy, in George Constantinides,
  3. (1987). Efficient signaling with dividends and investments,
  4. (1991). Share repurchases and takeover deterrence,
  5. (1988). Corporate payout policy: Cash dividends versus open market repurchases,
  6. (2009). Dividends and corporate shareholders,
  7. (1997). Do changes in dividends signal the future or the past?,Journal of
  8. (1932). eds.: The Modern Corporation and Private Property (Mac Millan,
  9. (1990). Shareholder preferences and dividend policy,
  10. (1970). Taxes, market valuation, and corporation financial policy,
  11. (2006). Corporate governance and firm valuation,
  12. (2008). The accuracy of analysts’ dividend forecasts around the world,
  13. (2007). Corporate governance and regulation: Can there be too much of a good thing?, Working Paper, World Bank.
  14. (2009). Dividends for tunneling in a regulated economy: The case of China,
  15. (2000). The separation of ownership and control in East Asian corporation,
  16. (2008). Dominant shareholders, corporate boards, and corporate value: A cross country analysis,
  17. (2008). Dividends, investment, and financial flexibility, Working paper,
  18. (1996). The distorting effect of the prudent man laws on institutional equity investments,
  19. (2008). Institutional tax clienteles and payout policy, Working Paper,
  20. (2007). Why do countries matter so much for corporate governance?,
  21. (2005). To steal or not to steal: Firm attributes, legal environment and valuation,
  22. (1984). Two agency cost explanations of dividends,
  23. (1970). Marginal stockholders’ tax rates and the clientele effect,
  24. (2001). Dividends and expropriation,
  25. (2001). Disappearing dividends: Changing firms characteristics or lower propensity to pay?,
  26. (2002). Corporate ownership structure and the informativeness of accounting earnings in East Asia,
  27. (2001). Corporate payout policy and managerial stock incentives,
  28. (2005). Controlling shareholders and corporate governance: Complicating the comparative taxonomy,
  29. (2005). Institutional holdings and payout policy,
  30. (1980). Takeover bids, the free rider problem, and the theory of the corporation,
  31. (1988). One share/one vote and the market for corporate control,
  32. (2008). Has the propensity to pay out declined?, Working paper,
  33. (2002). Dividends, share repurchases, and the substitution hypothesis,
  34. (2000). The cash flow permanence and information of dividend increases versus repurchases,
  35. (2003). Corporate governance and return on investment, Working Paper, European Corporate Governance Institute.
  36. (2008). Corporate governance and firm cash holdings in the US,
  37. (2003). Disclosure practices, enforcement of accounting standards and analysts’ forecast accuracy: An international study,
  38. (2000). Financial flexibility and the choice between dividends and stock repurchases,
  39. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure,
  40. (1986). Agency costs of free cash flow, corporate finance and takeovers,
  41. (1985). Dividends, dilution, and taxes: A signaling equilibrium,
  42. (2002). When a buyback isn’t a buyback: Open market repurchases and employee options,
  43. (1982). The ex dividend day behavior of stock prices: A re examination of the clientele effect,
  44. (2004). Corporate governance, investor protection and performance in emerging markets,
  45. (2008). Dominant owner and financial performance of continental European firms, Working Paper
  46. (1999). Corporate ownership around the world,
  47. (2000). Florencio Lopez de Silanes, Andrei Shleifer and Robert Vishny,
  48. (1997). Legal determinants of external capital,
  49. (1989). Dividend announcements: Cash flow signaling vs. free cash flow hypothesis,
  50. (2003). Earnings management and investor protection: An international comparison,
  51. (2000). Excess funds and agency problems: An empirical study of incremental cash disbursements,
  52. (1956). Distribution of incomes of corporations among dividends, retained earnings and taxes,
  53. (2009). Do country level investor protections impact security level contract design? Evidence from foreign bond covenants, Working Paper,
  54. (1978). Dividends and taxes,
  55. (1961). Dividend policy, growth and the valuation of shares,
  56. (1985). Dividend policy under asymmetric information,
  57. (2005). The effect of shareholder taxes on corporate payout choice, Unpublished PhD Thesis,
  58. (1984). Corporate financing and investment decisions when firms have information that investors do not have,
  59. (2008). Payout policy, financial flexibility, and agency costs of free cash flow, Working Paper,
  60. (2008). The impact of hedging on firm value: Evidence from Brazil,
  61. (1997). A survey of corporate governance,
  62. (2010). The “antidirector rights index” revisited,
  63. (1988). Managerial control of voting rights: Financing policies and the market for corporate control,
  64. (1984). Repurchase tender offers, signaling, and managerial incentives,
  65. (1988). Efficient signaling with dividends, investment, and stock repurchases,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.