The Impact of CEO Political Ideology on Labor Cost Reductions and Payout Decisions During the COVID-19 Pandemic

78 Pages Posted: 7 Dec 2021 Last revised: 22 Apr 2024

See all articles by Ali Bayat

Ali Bayat

University of Aberdeen

Marc Goergen

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

Panagiotis Koutroumpis

Queen Mary University London

Xingjie Wei

University of Leeds - Faculty of Business

Date Written: November 30, 2021

Abstract

Using a hand-collected dataset, we study whether CEO political ideology affected S&P 500 firms’ reactions to the COVID-19 pandemic in 2020. In such a situation, CEOs can make shareholders bear the pain that rises by paying lower dividends, make the workforce bear the pain by reducing labor costs, or share the pain. We hypothesize that conservative CEOs would have been more likely to aggressively reduce labor costs while still meeting dividend expectations. Conversely, other CEOs would have been less likely to meet dividend expectations and less likely to reduce labor costs. The evidence supports this hypothesis. We also find that, during the pandemic, conservative CEOs used temporary downsizing to avoid earnings losses, enabling them to meet dividend expectations.

Keywords: CEO political ideology, dividend policy, downsizing, stakeholder management, Covid-19 pandemic

JEL Classification: G35,G34,M51

Suggested Citation

Bayat, Ali and Goergen, Marc and Koutroumpis, Panagiotis and Wei, Xingjie, The Impact of CEO Political Ideology on Labor Cost Reductions and Payout Decisions During the COVID-19 Pandemic (November 30, 2021). European Corporate Governance Institute – Finance Working Paper No. 802/2021, Available at SSRN: https://ssrn.com/abstract=3977042 or http://dx.doi.org/10.2139/ssrn.3977042

Ali Bayat

University of Aberdeen ( email )

King's College
Aberdeen, AB24 3FX
United Kingdom

HOME PAGE: http://https://www.abdn.ac.uk/business/people/profiles/ali.bayat

Marc Goergen (Contact Author)

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

Panagiotis Koutroumpis

Queen Mary University London ( email )

Office GC 3.32
Graduate Centre, Mile End Campus
London, E14NS
United Kingdom
02078825872 (Phone)

HOME PAGE: http://www.pkoutroumpis.com

Xingjie Wei

University of Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
200
Abstract Views
1,103
Rank
281,293
PlumX Metrics