CEO Political Ideology, Shareholder Primacy and Dividend Policy
55 Pages Posted: 21 Jan 2020 Last revised: 11 Aug 2020
Date Written: January 20, 2020
We argue that CEOs have diﬀerent attitudes toward the ﬁrm’s stakeholders and that these diﬀerences in attitudes aﬀect the ﬁrm’s decision making. We hypothesize that these diﬀerences stem from diﬀerences in political ideology: Liberal CEOs, as compared to their conservative counterparts, pay less attention to shareholders and this is reﬂected in dividend policy. To test the validity of our hypothesis, we measure CEO ideology by political donations. We study the CEOs of S&P 500 ﬁrms during 1997-2014 and ﬁnd that ﬁrms with liberal CEOs are less likely to pay dividends and have signiﬁcantly lower dividend payouts. In contrast, conservative CEOs pay more dividends, even if this requires redundancies.
Keywords: CEO Political Ideology, Dividend Policy, Stakeholder Theory, Corporate Governance
JEL Classification: G35, G34
Suggested Citation: Suggested Citation