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.