Managerial Social Capital and Dividends: Evidence from the UK

Omar Al-Bataineh, Abdullah Iqbal and Timothy King ()
Additional contact information
Omar Al-Bataineh: Kent Business School, University of Kent, Canterbury CT2 7FS, UK
Abdullah Iqbal: Kent Business School, University of Kent, Canterbury CT2 7FS, UK
Timothy King: School of Accounting and Finance, University of Vaasa, Wolffintie 32, FI-65200 Vaasa, Finland

JRFM, 2024, vol. 17, issue 12, 1-25

Abstract: We examine the relationship between managerial social capital (MSC) and firms’ dividend policies. For an unbalanced panel of publicly listed UK FTSE 350 firms from 2006 to 2017, we find that MSC has a negative impact on a firm’s dividend policy. Firms pay lower dividends when a higher proportion of well-connected directors join corporate boards. Our main result is consistent with the notion that a high degree of social capital leads to better monitoring and control; therefore, social capital works under the substitution effect between governance quality and dividend payouts. In further analyses, we explore potential differences in this relationship between financial and non-financial firms and show that the association between MSC and dividend policy is weaker in financial firms than in non-financial firms. Taken together, our findings infer that investors should consider the social capital status of firms when they make investment decisions. Our results proved to be robust when subjected to a battery of tests, including alternative model specifications and definitions of MSC.

Keywords: dividend policy; managerial social capital; corporate governance; social connections; social networks (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/17/12/560/pdf (application/pdf)
https://www.mdpi.com/1911-8074/17/12/560/ (text/html)

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:gam:jjrfmx:v:17:y:2024:i:12:p:560-:d:1544328

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().