How do powerful CEOs view dividends and stock repurchases? Evidence from the CEO pay slice (CPS)

Pandej Chintrakarn, Pattanaporn Chatjuthamard, Shenghui Tong and Pornsit Jiraporn

International Review of Economics & Finance, 2018, vol. 58, issue C, 49-64

Abstract: Agency theory suggests that CEOs view dividends unfavorably because dividend payouts deprive them of the free cash flow they could otherwise exploit. Using Bebchuk, Cremers, and Peyer’s (2011) CEO pay slice (CPS) to measure CEO power, we find that an increase in CEO power by one standard deviation decreases the probability of paying dividends by 17.48%. For dividend-paying firms, a rise in CEO power by one standard deviation reduces the size of dividend payouts by 5.91%. Share repurchases, however, are not influenced by CEO power, although they too take away the free cash flow from the CEO.

Keywords: Dividends; Dividend policy; CEO pay slice; CEO power; Repurchases; Buybacks; Agency theory (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056016303148
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:reveco:v:58:y:2018:i:c:p:49-64

DOI: 10.1016/j.iref.2018.02.023

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().