We analyze the payout channel choice of listed UK firms and examine whether the choice between dividends, share repurchases, a combination of payout channels, or
complete earnings retention is affected by investor sentiment, taxation, major shareholder ownership, and in particular the CEO?s compensation package.
The payout choice can have an immediate effect on the value of the CEO?s stock options and restricted stock, whereby anticipated dividends drive down the value of her equity-based pay if it is not dividend-protected whereas share repurchases may have a positive impact. We use a quantile regression analysis to examine various payout scenarios as well as a nested logit model which studies payout choice conditional on changing payout levels. We find that it is the CEO?s personal wealth as reflected by her compensation package rather than shareholder preferences which has the strongest impact on the firm?s payout policy.
This paper quantifies the cost of CEO incentive compensation by estimating an elasticity of pay to the variance of pay. Using US CEO compensation data and a variety of empirical approaches, we find that CEOs with riskier pay packages are paid...Read more
We investigate the impact on firms of joining the S&P 500 index from 1997 to 2017. We find that the positive announcement effect on the stock price of index inclusion has disappeared and the long-run impact of index inclusion has become...Read more
We investigate whether acquisition experience of executive and non-executive directors is priced in their remuneration. We find that acquisition experience generates a contractual premium, and the relative size of this premium is higher for non-...Read more
Are firms’ financial disclosure decisions affected by executive compensation at other firms? We find that a CEO’s pay gap relative to the highest CEO pay among industry peers, defined as industry tournament incentives, can lead to distortions in...Read more