CEO Political Ideology, Shareholder Primacy and Payout Policy

Abstract

This study investigates how CEO political ideology affects payout policy. We argue that CEO political ideology determines how CEOs prioritize the interests of shareholders and employees. We hypothesize that conservative CEOs are more likely to pay dividends, to pay higher dividends, and to conduct share repurchases. Studying the CEOs of S&P 500 firms during 1997-2019 and measuring CEO political ideology by CEO political donations, we can confirm our hypothesis. Nevertheless, we do not find that firms with conservative CEOs perform differently; nor are they less likely to cut dividends. We provide possible reasons for this pattern.

Keywords: CEO Political Ideology, Payout Policy, Dividend Policy, Share Repurchases, Corporate Governance, Stakeholders

JEL Classification: G35, G34