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

Pandej Chintrakarn, Pattanaporn Chatjuthamard, Shenghui Tong, Pornsit Jiraporn

Research output: Contribution to journalArticle

6 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)49-64
Number of pages16
JournalInternational Review of Economics and Finance
Volume58
DOIs
StatePublished - Nov 2018

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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