Dividend payout and executive compensation: theory and evidence from New Zealand

Warwick Anderson, Nalinaksha Bhattacharyya, Cameron Morrill and Helen Roberts

Accounting and Finance, 2020, vol. 60, issue S1, 1007-1022

Abstract: Using a model based on Bhattacharyya (2007), we predict a positive (negative) relationship between the earnings retention ratio (dividend payout ratio) and managerial compensation. We use tobit regression to analyse data for New Zealand firms' dividend payouts over the period 1997–2015 and find results consistent with Bhattacharyya (2007). These results hold when the definition of payout is modified to incorporate both common dividends and common share repurchases. Our results indicate that corporate dividend policy among New Zealand firms is perhaps best understood by considering the dividend payout ratio, rather than the level of, or changes in, cash dividends alone.

Date: 2020
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