Is payout policy part of the corporate governance system? The case of France
by Celine du Boys
European J. of International Management (EJIM), Vol. 3, No. 1, 2009

Abstract: This paper examines the place of payout policies in governance systems. It analyses the conditions in which payout is used to regulate agency conflicts and studies the relations between dividend or share repurchase and the other governance mechanisms. Through the study of 167 French firms from 2000 to 2005, the author shows that in France payout is not used to regulate conflicts between majority and minority shareholders, but rather to limit free cash flow risk or conflict between managers and shareholders. In presence of a majority shareholder, the governance systems do not achieve in forcing insiders to disgorge cash. The study confirms the substitutability between debt and payout and shows that blockholders have an effect on payout. On the contrary, the board's characteristics, except the directors' independence, do not influence payout.

Online publication date: Mon, 19-Jan-2009

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