Literature Review: Dividend Policy, Agency Theory and Corporate Governance

Abstract

This article surveys three theories, about the share of company profit or profits that are distributed to shareholders, agency theory, and governance of a company also includes the relationship between the stakeholders involved and the objectives of the company's management. Dividend policy is still an important issue that leads to agency conflicts. The payment of dividends is a form of agency conflict among the majority and the minority shareholders. In the meantime, the corporate governance mechanism can be a supervisory mechanism that will reduce agency conflicts. The results of this review explain that the yield model and replacement model need to be redeveloped with dividend policy, corporate governance characteristics and legal protection of investors with the result that varied and strong empirical evidence can be obtained.

Do contingent liabilities affect dividend decisions?

“…Our findings reflect that CLIB is negatively associated with dividend payout decisions, and our results support agency theory. Dividend decisions are a form of agency conflict (Handayani et al ., 2022), and higher dividend payments are related to higher agency costs (Chang et al ., 2016). One possible explanation for the reported results is related to the uncertainty associated with CLIB.…”