Hot-Stove Effects: The Impact of CEO Past Corporate Experiences on Dividend Policy

49 Pages Posted: 1 Mar 2020 Last revised: 4 Jan 2021

See all articles by Matthew Faulkner

Matthew Faulkner

San Jose State University

Luis García-Feijóo

Florida Atlantic University - Department of Finance

Date Written: January 30, 2020

Abstract

The personal traits of CEOs have been found to influence corporate policy decisions. We examine the impact of CEO past corporate distress experiences on payout policy. CEOs who have experienced a distress event in their career, while working in a non-CEO position at a different firm, subsequently alter corporate payout policy once in the CEO position. They are less likely to pay dividends and repurchase shares, pay out lower levels of dividends, and are less likely to increase dividends. They further exhibit preference toward repurchases. Overall, we report that experience-driven conservatism affects payout policy, a novel finding in the literature.

Keywords: CEO experience, dividend policy, payout policy, behavioral finance

JEL Classification: G30, G35, G40

Suggested Citation

Faulkner, Matthew and Garcia-Feijoo, Luis, Hot-Stove Effects: The Impact of CEO Past Corporate Experiences on Dividend Policy (January 30, 2020). Available at SSRN: https://ssrn.com/abstract=3529701 or http://dx.doi.org/10.2139/ssrn.3529701

Matthew Faulkner (Contact Author)

San Jose State University ( email )

United States

Luis Garcia-Feijoo

Florida Atlantic University - Department of Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States
954-236-1239 (Phone)

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