CEO Dividend Protection
46 Pages Posted: 13 Jul 2013 Last revised: 22 Sep 2017
Date Written: August 15, 2017
Abstract
This paper studies CEO dividend protection, an important element in the executive compensation package that protect CEOs' compensation from stock price drops due to dividend payments. First, I show that there is large variation among S&P 500 firms in whether they provide dividend protections to their CEOs or not. Second, CEO dividend protection is positively associated with firms' dividend payout. Third, a time series analysis suggests that dividend protection is implemented prior to a firm increasing dividends. Finally, there is no evidence suggesting that CEO dividend protection affects other corporate policies, such as cash holdings and investment.
Keywords: Payout policy, Executive compensation, Dividend protection
JEL Classification: G30, M52
Suggested Citation: Suggested Citation