 The effect of managerial ability on dividend policy: how do talented managers view dividend payouts?Pornsit Jiraporn, Veeranuch Leelalai and Shenghui Tong Applied Economics Letters, 2016, vol. 23, issue 12, 857-862 Abstract: We contribute to the literature on dividend policy by relaxing Miller and Modigliani’s (1961) perfect capital market assumptions and incorporating a factor that has not been investigated before, that is, variation in managerial ability. Based on more than 24 000 observations across over 20 years (1989–2011), our results show that firms with more talented executives are more likely to pay dividends and, among firms that pay dividends, pay significantly larger dividends. A rise in managerial ability by one SD raises the propensity to pay dividends by 27% and, for firms that pay dividends, increases dividend payouts by 29%. Our results are consistent with the notion that talented managers, confident in their ability to keep the firm profitable, are more willing to pay larger dividends because they are less concerned about having to reduce dividends in the future. Further analysis shows that our results are not likely vulnerable to endogeneity. Date: 2016 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:23:y:2016:i:12:p:857-862 Ordering information: This journal article can be ordered from DOI: 10.1080/13504851.2015.1114572 Access Statistics for this article Applied Economics Letters is currently edited by Anita Phillips More articles in Applied Economics Letters from Taylor & Francis Journals |
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