Stock liquidity, agency cost, and dividend payouts

Yi Hu, Weiwei Huang and Zihao Chen

Applied Economics Letters, 2020, vol. 27, issue 4, 335-339

Abstract: From an agency theory perspective, we find the increase of stock liquidity will lead to more dividend payouts. There are two potential channels, the ‘outcome hypothesis’ (La Porta et al. 2000) and the ‘creditors substitute hypothesis’ (Brockman and Unlu 2009), through which stock liquidity could increase dividend payouts. We confirm that stock liquidity influences dividend payouts mainly through the latter.

Date: 2020
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DOI: 10.1080/13504851.2019.1616052

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