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Dividend policy and political uncertainty: Evidence from the US presidential elections

Omar Farooq and Neveen Ahmed

Research in International Business and Finance, 2019, vol. 48, issue C, 201-209

Abstract: This paper shows that dividend policies adopted by the US firms are sensitive to presidential elections. Using a large dataset covering six presidential elections (1996–2016), we show that firms pay higher percentage of their earnings as dividends during the election years relative to non-election years. We also show that this sensitivity is confined only to the presidential elections. The gubernatorial elections have no impact on dividend policies adopted by firms. Furthermore, our results suggest that higher are the economic uncertainties (uncertainties related to monetary policies, fiscal policies, and national security policies) in the years of election, higher are the dividend payout ratios. Lastly, we show that firms that pay high dividends during the years of presidential elections have higher value than otherwise similar firms that pay low dividends.

Keywords: Dividend policy; Presidential elections; Political; Uncertainty; Information asymmetry (search for similar items in EconPapers)
Date: 2019
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