Geopolitical risk and corporate payout policy

Samer Adra, Yang Gao, Jin Huang and Jiayi Yuan

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: In this study, we examine the effects of geopolitical risk on corporate payout policy. Exploiting a news-based index of geopolitical risk, we find that firms adopt a more conservative payout policy by reducing share repurchases in response to greater geopolitical risk, whereas the effects of geopolitical risk on cash dividends are insignificant. Further analysis suggests that cash flow uncertainty and financial distress risk are two potential channels through which geopolitical risk affects corporate payout policy. We also show that the effects of geopolitical risk on share repurchase are more pronounced for firms with greater exposure to product market competition and those facing higher threats of financial distress. Overall, our study emphasizes the implications of geopolitical risk for corporate payout choice.

Keywords: Geopolitical risk; Corporate payout policy; Share repurchase; Cash dividend (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001291

DOI: 10.1016/j.irfa.2023.102613

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