CEO reputations and dividend payouts

Abstract

Over the past decades, there have been numerous discussions about the influence of dividend policy and the value of firms. In many of the literature in this field, frameworks have been developed to show that dividend policy has implications for firms’ value in the imperfect and inefficient capital markets. If dividend policy has an influence on the firm’s value, then it is worth exploring the factors that have an influence on dividend policy. Past literature has found a large number of firm-specific variables as the determinants of dividend policy. The purpose of this research is to test the association between CEO reputation and the dividend payments of corporations while controlling for firm size, market-to-book ratio, leverage, R&D spending, capital expenditures, CEO tenure, year dummies, and industry dummies. Using press coverage (media counts) to proxy for CEO reputation, this study conducts empirical tests and finds that firms with reputable CEOs tend to make more investment in R&D and tend to pay lower dividends. The logistic regression shows that firms with more reputable CEOs are less likely to payout dividends.