The Substitute Model of Dividends at Work: a change in minority shareholder protection

Ricardo D. Brito (), Paulo Sergio O. Ribeiro () and Antonio Z. Sanvicente ()

No 2021_25, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: The Brazilian company law reform of 1976, which improved the minority shareholders protection but preserved the corporate power structure concentrated, provides an experiment to test the Substitute agency theory of dividends. Are dividends a substitute for the legal protection of shareholders? In the pre-reform low-legal-protection Brazilian market, growth firms issuing equity in the future used to signal proper governance through higher dividends. With the reform protecting minority shareholders, dividend payouts do not generally increase but decrease from unrestricted firms, mature firms’ payouts do not increase but decrease for growth firms. All these according to the Substitute narrative of dividends.

Keywords: Agency Problems; Dividend Policy; Signaling (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
Date: 2021-11-18
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.repec.eae.fea.usp.br/documentos/Brito_Ribeiro_Sanvicente_25WP.pdf (application/pdf)

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:spa:wpaper:2021wpecon25

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers, Department of Economics from University of São Paulo (FEA-USP) Contact information at EDIRC.
Bibliographic data for series maintained by Pedro Garcia Duarte ( this e-mail address is bad, please contact ).