Dividend policy: Balancing shareholders' and creditors' interests

Liang SHAO*, Chuck C.Y. Kwok, Omrane Guedhami

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    46 Citations (Scopus)


    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.

    Original languageEnglish
    Pages (from-to)43-66
    Number of pages24
    JournalJournal of Financial Research
    Issue number1
    Publication statusPublished - Mar 2013

    Scopus Subject Areas

    • Accounting
    • Finance


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