Dividend commitment and bond yields: An examination of wealth transfer effects

This paper examines a new type of corporate governance mechanism that has emerged in China, namely, dividend commitment, and documents its wealth transfer effects on bond yields. We find the larger-commitment group exhibits greater bond yields than the smaller-commitment group. Further analysis reve...

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Bibliographic Details
Published in:Finance research letters 2022-06, Vol.47, p.102719, Article 102719
Main Authors: Wang, Guojun, Wang, Yuetang, Yang, Dan, Cheng, Linyin
Format: Article
Language:English
Subjects:
Bond yield
Corporate governance
Dividend commitment
Dividend policy
Wealth transfer
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Summary:This paper examines a new type of corporate governance mechanism that has emerged in China, namely, dividend commitment, and documents its wealth transfer effects on bond yields. We find the larger-commitment group exhibits greater bond yields than the smaller-commitment group. Further analysis reveals that bondholders pay more attention to the wealth transfer effects when government bailouts are not available, when investing in exchange-traded bonds, and when other guarantees are not offered. This study sheds light on the effects of a unique governance mechanism in the Chinese bond market and contributes to the literature on global finance and corporate governance.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2022.102719