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.
Using the pay restriction imposed on CEOs of centrally administered state-owned enterprises (CSOEs) in China in 2009, we study the effects of limiting CEO pay. Compared with CEOs of firms not subject to the restriction, the CEOs of CSOEs...Read more
Adjusting for inflation, the annual amount paid out through dividends and share repurchases by public non-financial firms is three times larger in the 2000s than from 1971 to 1999. We find that an increase in aggregate corporate income explains...Read more
We analyze compensation design in banks. Specifically, we document associations with firm characteristics, time-series trends, pay-for-performance sensitivities, performance based pay, and the sensitivity of firm-related wealth to changes in...Read more
Contrary to signaling models’ central predictions, changes in the level of cash flows do not empirically follow changes in dividends. We use the Campbell (1991) decomposition to construct cash-flow and discount-rate news from returns and find the...Read more