Shareholder-Creditor Conflict and Payout Policy: Evidence from Mergers between Lenders and Shareholders

Chu, Yongqiang

doi:10.1093/rfs/hhx142

Cited by 103 publications

(52 citation statements)

References 27 publications

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“…By having more concentrated claims, they can better respond to coordinated shareholders whose interests may substantially differ from those of creditors in case of borrower distress. In this line, Chu (), for example, shows that the shareholder–creditor conflict induces firms to pay out more at the expense of creditors and that this problem is more pronounced for firms in financial distress. If the presence of influential shareholders further exacerbates the shareholder–creditor conflicts and coordination costs among different types of creditors, we expect that as institutional investors become better coordinated and/or more influential, the demand for monitoring by creditors and, by extension, debt specialisation will increase.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Platikanova

Soonawalla

2019

Accounting & Finance

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In this study, we suggest that the level of information opaqueness determines the propensity of publicly listed firms to have debt financing from only a few debt types (i.e., debt specialisation). Using accruals quality as a proxy for information opaqueness, we find that the degree of debt specialisation is lower for firms with high-quality accruals. This result is consistent with the notion that information collection and monitoring costs are higher for firms that have higher informational opacity, explaining the tendency towards debt specialisation. We further argue that creditors need not monitor borrowers so closely when they are monitored by institutional owners. The empirical findings support this argument and show that firms with more stable institutional ownership are likely to have less specialised debt types. The empirical evidence is also consistent with the expectation that stable institutional ownership is likely to reduce the demand for monitoring over accruals management. Using S&P 500 membership as an exogenous event driving institutional ownership changes, we further document that debt specialisation is decreasing in accruals quality when institutional investors are expected to have an influence.An extensive literature in corporate finance and financial accounting examines the accounting information properties that facilitate access to debt

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Platikanova

Soonawalla

2019

Accounting & Finance

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“…Wang () documents that firms that are more dependent on customer–supplier relationships pay out less dividends. Chu () indicates that shareholder–creditor conflicts induce firms to pay out more at the expense of creditors.…”

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confidence: 99%

Mandatory corporate social responsibility disclosure and dividend payouts: evidence from a quasi‐natural experiment

Zhang

2019

Accounting & Finance

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Employing the enactment of a regulation that mandates a subset of firms to disclose their corporate social responsibility (CSR) activities as a quasi-natural experiment, we find that mandatory CSR disclosure reduces firms' dividend payouts significantly. Further analyses indicate that the negative relation is more pronounced for firms with weaker corporate governance mechanisms, where shareholders lack of effective tools to protect themselves against pressures from stakeholders, and a shift of relative power towards stakeholders is more likely to occur. Our paper provides a specific channel through which mandatory CSR disclosure benefits stakeholders at the expense of shareholders.

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“…DeAngelo and DeAngelo (1990) show empirical evidence that firms in financial distress are reluctant to cut dividends. Chu (2017) finds that firms reduce dividend payouts when blockholders and important lenders internalize the negative value effects that dividend payouts create for lenders and, hence, mitigate shareholder-creditor conflicts. 9 Chu (2017) also finds that this mitigation is particularly pronounced when firms are in financial distress.…”

Section: Literature and Hypothesesmentioning

confidence: 98%

Blockholder Leverage and Payout Policy: Evidence from French Holding Companies

et al. 2019

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This paper focuses on dominant owners' use of leverage to finance their blockholdings and its relationship to dividend policy. We postulate that blockholder leverage may impact payout policy, in particular when earnings are hit by a negative shock. We use panel data for France where blockholders have tax incentives to structure their leverage in pyramidal holding companies and study the effect of the financial crisis in 2008/2009. We find no difference in payout policy and financial behavior during the 1999 to 2008 period between firms with levered owners and other firms. However, in the years 2009 to 2011 following the crisis, dividend payouts increase in proportion to pyramidal debt of dominant owners. We inspect pyramidal entities individually and find that on average only 60% of dividends are passed through to the ultimate owners, with the rest predominantly used to meet debt service obligations of the pyramidal entities.

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Shareholder-Creditor Conflict and Payout Policy: Evidence from Mergers between Lenders and Shareholders

Cited by 103 publications

References 27 publications

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Mandatory corporate social responsibility disclosure and dividend payouts: evidence from a quasi‐natural experiment

Blockholder Leverage and Payout Policy: Evidence from French Holding Companies

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