Stakeholder orientation and corporate payout policy: Insights from state legal shocks

Xiaoran Ni, Wei Song and Jiaquan Yao

Journal of Banking & Finance, 2020, vol. 121, issue C

Abstract: We employ a difference-in-differences estimation approach to examine the impact of stakeholder orientation on corporate payout policy. The empirical test exploits the enactment of US state-level constituency statutes, which allow directors to consider stakeholders and long-term interests in corporate decision making. We find that firms incorporated in states that have adopted constituency statutes significantly reduce share repurchases, whereas the effects of statute enactment on total payout and dividend payments are marginal and insignificant, respectively. We further show that the negative statute effect on share repurchases is more pronounced for firms that are in financial distress or are close to default, and firms in consumer-focused and high-polluting industries. Overall, our findings indicate that promoting stakeholder orientation can have a significant impact on corporate payout decisions.

Keywords: Stakeholder orientation; Constituency statutes; Share Repurchases; Payout Decision (search for similar items in EconPapers)
JEL-codes: G31 G32 G38 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:121:y:2020:i:c:s0378426620302326

DOI: 10.1016/j.jbankfin.2020.105970

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