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CEO Overconfidence and Dividend PolicySanjay DeshmukhDePaul University - Department of Finance Anand M. GoelNavigant Economics - Chicago Keith M. HoweDePaul University - Department of Finance February 18, 2010 Abstract: We develop a model of the effect of CEO overconfidence on dividend policy and empirically examine its central predictions. Consistent with our main prediction, we find that the level of dividend payout is lower in firms managed by overconfident CEOs. We document that this reduction in dividends associated with CEO overconfidence is greater in firms with lower growth opportunities and lower cash flow. We also show that the magnitude of the positive market reaction to a dividend-increase announcement is lower for firms managed by overconfident CEOs. Our overall results are consistent with the predictions of our model.
Number of Pages in PDF File: 55 Keywords: CEO, Overconfidence, Dividends, Payout JEL Classification: G350, D810 working papers seriesDate posted: October 29, 2009 ; Last revised: March 16, 2010Suggested CitationContact Information
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