Define: Dividend Clawback

Business, Legal & Accounting Glossary

Definition: Dividend Clawback



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Full Definition of Dividend Clawback


A dividend clawback is an incentive for investors to keep investment development plans on schedule. Dividend clawback means a promise by investors to return dividends as equity to the investment if any cash deficiencies occur. A dividend clawback pays for any investment shortfall from project cost overruns. For example, if 20 investors received $20 million in dividends and later a $10 million shortfall occurs, the dividend clawback to fund the deficiency is $10 million. If there is no investment shortfall, no dividend clawback is paid. Dividend clawback contracts are most common in project finance. When investors pay a dividend clawback they do not pay cash, they pay prior dividends already received in order to add equity to the project. The dividend clawback amount is always limited to the project’s cash shortage and does not provide capital for new plans.


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Definition Sources


Definitions for Dividend Clawback are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th February, 2020