Dividend payout and executive compensation: theory and evidence
AbstractBhattacharyya (2007) develops a model in which compensation contracts motivate high-quality managers to retain and invest firm earnings, while low-quality managers are motivated to distribute income to shareholders. In equilibrium, the model shows that there is a positive (negative) relationship between the earnings retention ratio (dividend payout ratio) and managerial compensation. Results of tests of US data show that executive compensation is positively (negatively) associated with earnings retention (dividend payout). Our results indicate that corporate dividend policy is perhaps best understood by considering the payout ratio (dividends divided by earnings), rather than the level of cash dividends alone. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 AFAANZ.
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Bibliographic InfoArticle provided by Accounting and Finance Association of Australia and New Zealand in its journal Accounting & Finance.
Volume (Year): 48 (2008)
Issue (Month): 4 ()
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- Chai, D.H., 2010. "Foreign Corporate Ownership and Dividends," ESRC Centre for Business Research - Working Papers wp401, ESRC Centre for Business Research.
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