Loyalty and Agency Problems: Study Comparing France Tunisia – Stable dividend Policy

Loyalty and Agency Problems: Study Comparing France Tunisia - Stable dividend PolicyAccording to the pioneering studies of Jensen and Meckling in 1976, the agency theory looks specifically at issues of conflict of interests in joint stock companies, as appropriate, in addition, to mitigate them. In this case, an application of strategies to stabilize and shareholder loyalty is an alignment of interests. Such shareholder will be faithful and less incentive to monitor the activities of leaders and to make decisions detrimental to the interests of the company. Monsen and Downs show that large firms with a very diffuse shareholder seeking to reduce priority conflicts between various stakeholders and to maintain them in a stable relationship through:
The choice of a stable dividend policy and not fluctuating is treated as specific investment managers. Desbrieres studied the choice and tests the appropriateness of adopting a dividend policy based on a survey with one hundred and thirteen small shareholders. It shows that the development of direct share ownership poses problems for companies privatized and more particularly to newly listed companies. He proposes as a solution to these problems, the loyalty of the population followed by a stable dividend policy. This author gives two conflicting objectives in dividend policy: if companies wish to attract and stabilize the small shareholders, they should follow a policy of distributing high. On the contrary, if they prefer to reduce the proportion of individual shareholders holding in the capital, it is sufficient to adopt a low rate of distribution. This proposal was resurrected by Calvi-Reveyron and Protin in an exploratory study on the problems of share repurchases in France. This study shows the positive impact of the strong presence of small shareholders on the dividend payment.
Contrary to the argument of neutrality of dividend policy demonstrated by Modigliani and Miller, this policy is an effective tool for managing conflicts of interest problems. Indeed, a policy of stable distribution reduces the agency costs borne by the shareholders by encouraging managers to use more importantly direct funding and thus reduce the flow.
Similarly, this hypothesis has been interpreted as a signal of profitability, attracting and motivating investors. In fact, the announcement of the dividend up or down indicate that leaders make public private information about the future of the company, thus reducing problems of asymmetric information. Calvi-Reveyron and Protin confirm empirically that the strong presence of problems of information asymmetry between managers and shareholders leads to a generous dividend policy. The payment of dividends solves, in a consistent manner, the problems of free cash flow related to the proposed investment. It has a supervisory role, monitoring, and incentives for executives to the shareholders.
Our first hypothesis is therefore:
H1: distribution dividend reduces problems of asymmetric information between managers and shareholders.