TY - UNPB
T1 - Between Scylla and Charybdis
T2 - CEO Political Ideology, Dividends and Downsizing During the Pandemic
AU - Bayat, Ali
AU - Goergen, Marc
AU - Koutroumpis, Panagiotis
AU - Wei, Xingjie
N1 - We are grateful to participants at the 7th annual conference of the International Corporate Governance Society at the University of Groningen, the 12th Financial Markets and Corporate Governance Conference at Monash University, the 2022 Finance Forum, the 2022 British Academy of Management Conference, the 22nd Hellenic Finance and Accounting Association conference, and the 2023 World-Class Workshop in Finance at Edinburgh University Business School for helpful comments and suggestions. We would also like to thank seminar participants at the universities of Aberdeen, Leeds, Sabanci, and Sussex, as well as participants at the 2022 Workshop on Corporate Governance and Investment at Copenhagen Business School, for their comments on earlier versions of this paper. Special thanks are due to Miguel Garc a-Cestona, Ricard Gil, Jordan Neyland, and Hanwen Sun.
PY - 2021/12/7
Y1 - 2021/12/7
N2 - Using a hand-collected dataset, we study whether CEO political ideology affected S&P 500 firms' reactions to the COVID-19 pandemic in 2020. In such a situation, CEOs can make shareholders bear the pain that rises by paying lower dividends, make the workforce bear the pain by reducing labor costs, or share the pain. We hypothesize that conservative CEOs would have been more likely to aggressively reduce labor costs while still meeting dividend expectations. Conversely, other CEOs would have been less likely to meet dividend expectations and less likely to reduce labor costs. The evidence supports this hypothesis. We also find that, during the pandemic, conservative CEOs used temporary downsizing to avoid earnings losses, enabling them to meet dividend expectations.
AB - Using a hand-collected dataset, we study whether CEO political ideology affected S&P 500 firms' reactions to the COVID-19 pandemic in 2020. In such a situation, CEOs can make shareholders bear the pain that rises by paying lower dividends, make the workforce bear the pain by reducing labor costs, or share the pain. We hypothesize that conservative CEOs would have been more likely to aggressively reduce labor costs while still meeting dividend expectations. Conversely, other CEOs would have been less likely to meet dividend expectations and less likely to reduce labor costs. The evidence supports this hypothesis. We also find that, during the pandemic, conservative CEOs used temporary downsizing to avoid earnings losses, enabling them to meet dividend expectations.
KW - CEO Political Ideology
KW - Dividend Policy
KW - Downsizing
KW - Stakeholder Management
KW - Covid-19 Pandemic
UR - https://www.ecgi.global/publications/working-papers/the-impact-of-ceo-political-ideology-on-labor-cost-reductions-and
U2 - 10.2139/ssrn.3977042
DO - 10.2139/ssrn.3977042
M3 - Discussion paper
VL - No. 802/2021
T3 - European Corporate Governance Institute – Finance Working Paper
BT - Between Scylla and Charybdis
PB - European Corporate Governance Institute
ER -