EconPapers    
Economics at your fingertips  
 

The payout policy of politically connected firms: Tunnelling or reputation?

Félix López-Iturriaga (flopez@eco.uva.es) and Domingo Javier Santana Martín

The North American Journal of Economics and Finance, 2019, vol. 50, issue C

Abstract: Using company directors who have a background in politics as a measure of political connections, we analyze the relationship between political ties and dividend policy in a sample of listed Spanish firms. We find political connections to be positively related with cash dividends. This result is consistent with concern regarding the interests of minority shareholders in politically connected firms or with the lower number of financial constraints in these firms. We also find a positive relationship between political connections and share repurchases, a means of shareholder compensation that is gaining popularity, a result that might be related to the valuation of politically connected firms. Our results are robust to alternative empirical specifications such as the propensity score matching procedure, different metrics of payout policy, and different measures of political connections. Interestingly, the recent financial crisis has not changed connected firms’ preference for shareholder compensation with dividends and share repurchases.

Keywords: Political connections; Dividends; Dominant owners; Share repurchases; Board of directors (search for similar items in EconPapers)
JEL-codes: G3 G34 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940819301123
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940819301123

DOI: 10.1016/j.najef.2019.101025

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).

 
Page updated 2024-12-28
Handle: RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940819301123