Governance and Payout Precommitment

Kose John, Anzhela Knyazeva and Diana Knyazeva

Journal of Corporate Finance, 2015, vol. 33, issue C, 101-117

Abstract: We examine how firms structure payout and debt commitments to address governance weaknesses. Firms with severe agency conflicts precommit through a combination of dividends and debt or through dividends rather than debt alone. Such firms also shift their shareholder payouts towards regular quarterly dividends—a stronger commitment than special dividends or repurchases. Although dividend commitments are implicit, event study evidence supports their credibility and value relevance for firms with weak governance. Despite harsher penalties, debt alone cannot replace shareholder payouts as a means of addressing managerial agency conflicts.

Keywords: Precommitment; Payout; Debt–dividend tradeoff; Corporate governance (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 G35 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119915000577
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:33:y:2015:i:c:p:101-117

DOI: 10.1016/j.jcorpfin.2015.05.004

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().