How Do Powerful CEOs View Dividends and Stock Repurchases? Evidence from the CEO Pay Slice (CPS)

52 Pages Posted: 8 Mar 2018

See all articles by Pandej Chintrakarn

Pandej Chintrakarn

Mahidol University International College (MUIC)

Pattanaporn Chatjuthamard

Sasin GIBA

Shenghui Tong

Central University of Finance and Economics (CUFE)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Date Written: February 28, 2018

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.

Keywords: dividends, dividend policy, CEO pay slice, CEO power, repurchases, buybacks, agency theory

JEL Classification: G30, G34

Suggested Citation

Chintrakarn, Pandej and Chatjuthamard, Pattanaporn and Tong, Shenghui and Jiraporn, Pornsit, How Do Powerful CEOs View Dividends and Stock Repurchases? Evidence from the CEO Pay Slice (CPS) (February 28, 2018). Available at SSRN: https://ssrn.com/abstract=3132115 or http://dx.doi.org/10.2139/ssrn.3132115

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand

Pattanaporn Chatjuthamard

Sasin GIBA ( email )

Bangkok
Thailand

Shenghui Tong

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

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