Dividends on Unearned Shares and Corporate Payout Policy: An Analysis of Dividend Equivalent Rights

Z. Tingting Jia and Don M. Chance ()
Additional contact information
Z. Tingting Jia: Bucknell University, One Dent Drive, Lewisburg, PA 17837, USA
Don M. Chance: Louisiana State University, 2909 Business Education Complex North, 501 South Quad Drive, Baton Rouge, LA 70803, USA

Quarterly Journal of Finance (QJF), 2022, vol. 12, issue 04, 1-42

Abstract: We investigate a little-known executive compensation device called dividend equivalents, which are provisions on some options and performance-based equity awards permitting executives to receive dividends on shares not owned and which they may ultimately never own. We find that up to 30% of sample firms have had this policy. While dividend equivalents may appear to exacerbate agency problems, they have a positive impact on cash holdings and help align incentives — firms with dividend equivalent policies tend to pay dividends, and firms that make dividend equivalent payments tend to pay higher dividends and keep lower excess cash.

Keywords: Dividend equivalent; executive compensation; corporate governance; dividend policy (search for similar items in EconPapers)
JEL-codes: G34 G35 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010139222500136
Access to full text is restricted to subscribers

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:wsi:qjfxxx:v:12:y:2022:i:04:n:s2010139222500136

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010139222500136

Access Statistics for this article

Quarterly Journal of Finance (QJF) is currently edited by Fernando Zapatero

More articles in Quarterly Journal of Finance (QJF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().