Political sentiment and corporate payouts

Ashrafee Hossain, Ramzi Benkraiem and Chandrasekhar Krishnamurti

International Review of Financial Analysis, 2025, vol. 102, issue C

Abstract: We provide empirical evidence of the impact of firm-level political sentiment on dividend policy. Using a sample composed of over 34,000 firm years, we find that a high level of political sentiment is associated with a lower level of dividend payout. The evidence is robust and survives several tests that address potential endogeneity. Our results suggest that managers consider investors' political sentiment in setting dividend policy. When political sentiment is negative, they pay higher dividends to assuage investors' concerns regarding future prospects. Our results are also consistent with the view that firms pay higher dividends to address the agency cost issue that arises from the free cash flow problem during periods of negative political sentiment.

Keywords: Dividend policy; Political sentiment; Behavioral corporate finance (search for similar items in EconPapers)
JEL-codes: G18 G35 G41 H32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:102:y:2025:i:c:s1057521925001656

DOI: 10.1016/j.irfa.2025.104078

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