CEO political ideology and payout policy

Ali Bayat; Marc Goergen

doi:10.1016/j.jbankfin.2024.107375

CEO political ideology and payout policy

Ali Bayat
, Marc Goergen^* (Corresponding Author)

^*Corresponding author for this work

IE Business School

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

3 Downloads (Pure)

Abstract

This study investigates how CEO political ideology affects payout policy. Studying the CEOs of S&P 500 firms during 1997–2019 and measuring CEO political ideology by CEO political donations, we find that conservative CEOs are more likely to pay dividends and to make share repurchases, while also paying higher dividends. We find that conservative CEOs finance the higher dividends and share repurchases by utilizing the cash holdings and reducing capital and R&D expenditures. Nevertheless, CEO political ideology does not explain dividend cuts. This suggests that firms led by conservative CEOs exhibit levels of dividend flexibility comparable to those of firms led by other CEOs. Finally, we find that CEO conservatism has no effect on firm performance, firm value, R&D expenditure, and capital expenditure.

Original language	English
Article number	107375
Number of pages	22
Journal	Journal of Banking and Finance
Volume	172
Early online date	10 Jan 2025
DOIs	https://doi.org/10.1016/j.jbankfin.2024.107375
Publication status	Published - Mar 2025

Bibliographical note

We would like to thank participants at the 6th Annual International Corporate Governance Society Conference at Strome College of Business, Old Dominion University, in November 2020, the 2020 Annual Meeting of the Academy of Management, the Workshop on Corporate Governance and Investment at Copenhagen Business School in 2022, and a research seminar at Tilburg University for helpful comments and suggestions. We are particularly grateful to Hossein Asgharian. Finally, we would like to express our gratitude to the Editor, Thorsten Beck, the Associate Editor, and two anonymous reviewers for their guidance.

Data Availability Statement

Data will be made available on request.

Funding

Research reported in this paper was partially funded by the Spanish State Research Agency (MCIU/AEI/10.13039/501100011033/FEDER, UE) – Grant No. PID2020-115982RB-C22 and Grant No. PID2023-148086NB-C22.

Funders	Funder number
Agencia Estatal de Investigación	MCIU/AEI/10.13039/501100011033/FEDER, UE, PID2020-115982RB-C22, PID2023-148086NB-C22

Keywords

CEO conservatism
CEO political ideology
Payout policy
Dividend policy
Share repurchases
Corporate governance

Access to Document

10.1016/j.jbankfin.2024.107375Licence: CC BY

Bayat_etal_JBF_CEO_political_ideology_VOR
https://creativecommons.org/licenses/by/4.0/
Final published version, 2.14 MBLicence: CC BY

Cite this

@article{1f71db94d497417a93b00d2df3034ec7,

title = "CEO political ideology and payout policy",

abstract = "This study investigates how CEO political ideology affects payout policy. Studying the CEOs of S\&P 500 firms during 1997–2019 and measuring CEO political ideology by CEO political donations, we find that conservative CEOs are more likely to pay dividends and to make share repurchases, while also paying higher dividends. We find that conservative CEOs finance the higher dividends and share repurchases by utilizing the cash holdings and reducing capital and R\&D expenditures. Nevertheless, CEO political ideology does not explain dividend cuts. This suggests that firms led by conservative CEOs exhibit levels of dividend flexibility comparable to those of firms led by other CEOs. Finally, we find that CEO conservatism has no effect on firm performance, firm value, R\&D expenditure, and capital expenditure.",

keywords = "CEO conservatism, CEO political ideology, Payout policy, Dividend policy, Share repurchases, Corporate governance",

author = "Ali Bayat and Marc Goergen",

note = "We would like to thank participants at the 6th Annual International Corporate Governance Society Conference at Strome College of Business, Old Dominion University, in November 2020, the 2020 Annual Meeting of the Academy of Management, the Workshop on Corporate Governance and Investment at Copenhagen Business School in 2022, and a research seminar at Tilburg University for helpful comments and suggestions. We are particularly grateful to Hossein Asgharian. Finally, we would like to express our gratitude to the Editor, Thorsten Beck, the Associate Editor, and two anonymous reviewers for their guidance.",

year = "2025",

month = mar,

doi = "10.1016/j.jbankfin.2024.107375",

language = "English",

volume = "172",

journal = "Journal of Banking and Finance",

issn = "0378-4266",

publisher = "Elsevier BV",

}

TY - JOUR

T1 - CEO political ideology and payout policy

AU - Bayat, Ali

AU - Goergen, Marc

N1 - We would like to thank participants at the 6th Annual International Corporate Governance Society Conference at Strome College of Business, Old Dominion University, in November 2020, the 2020 Annual Meeting of the Academy of Management, the Workshop on Corporate Governance and Investment at Copenhagen Business School in 2022, and a research seminar at Tilburg University for helpful comments and suggestions. We are particularly grateful to Hossein Asgharian. Finally, we would like to express our gratitude to the Editor, Thorsten Beck, the Associate Editor, and two anonymous reviewers for their guidance.

PY - 2025/3

Y1 - 2025/3

N2 - This study investigates how CEO political ideology affects payout policy. Studying the CEOs of S&P 500 firms during 1997–2019 and measuring CEO political ideology by CEO political donations, we find that conservative CEOs are more likely to pay dividends and to make share repurchases, while also paying higher dividends. We find that conservative CEOs finance the higher dividends and share repurchases by utilizing the cash holdings and reducing capital and R&D expenditures. Nevertheless, CEO political ideology does not explain dividend cuts. This suggests that firms led by conservative CEOs exhibit levels of dividend flexibility comparable to those of firms led by other CEOs. Finally, we find that CEO conservatism has no effect on firm performance, firm value, R&D expenditure, and capital expenditure.

AB - This study investigates how CEO political ideology affects payout policy. Studying the CEOs of S&P 500 firms during 1997–2019 and measuring CEO political ideology by CEO political donations, we find that conservative CEOs are more likely to pay dividends and to make share repurchases, while also paying higher dividends. We find that conservative CEOs finance the higher dividends and share repurchases by utilizing the cash holdings and reducing capital and R&D expenditures. Nevertheless, CEO political ideology does not explain dividend cuts. This suggests that firms led by conservative CEOs exhibit levels of dividend flexibility comparable to those of firms led by other CEOs. Finally, we find that CEO conservatism has no effect on firm performance, firm value, R&D expenditure, and capital expenditure.

KW - CEO conservatism

KW - CEO political ideology

KW - Payout policy

KW - Dividend policy

KW - Share repurchases

KW - Corporate governance

U2 - 10.1016/j.jbankfin.2024.107375

DO - 10.1016/j.jbankfin.2024.107375

M3 - Article

SN - 0378-4266

VL - 172

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

M1 - 107375

ER -

CEO political ideology and payout policy

Abstract

Bibliographical note

Data Availability Statement

Funding

Keywords

Access to Document

Fingerprint

Cite this