Passing the Dividend Baton: The Impact of Dividend Policy on New CEOs’ Initial Compensation

72 Pages Posted: 28 May 2019

See all articles by Jie Chen

Jie Chen

Leeds University Business School, University of Leeds

Wei Song

Swansea University - School of Management

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Date Written: April 1, 2019

Abstract

We examine how firms’ dividend policy affects the initial compensation of their newly appointed CEOs. We focus on newly appointed CEOs to isolate the effect of dividends on compensation and to provide new insights into an aspect largely neglected by compensation research. We show that the dividend payout is positively related to new CEO compensation. Further, the positive effect of dividends is stronger for firms with no dividend cuts over the past two, three and four years, firms with relatively high institutional ownership, and those with strong boards, consistent with new CEOs receiving higher pay as compensation for greater dividend pressure.

Keywords: CEO compensation; New CEOs; Dividend policy; Corporate governance

JEL Classification: G30, G35, J33

Suggested Citation

Chen, Jie and Song, Wei and Goergen, Marc, Passing the Dividend Baton: The Impact of Dividend Policy on New CEOs’ Initial Compensation (April 1, 2019). Journal of Corporate Finance, Vol. 56, No. 458-481, 2019. Available at SSRN: https://ssrn.com/abstract=3381175

Jie Chen (Contact Author)

Leeds University Business School, University of Leeds ( email )

Leeds LS2 9JT
United Kingdom

HOME PAGE: http://https://business.leeds.ac.uk/about-us/our-people/staff-directory/profile/jie-chen-1/

Wei Song

Swansea University - School of Management ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Marc Goergen

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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