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CEO power and the likelihood of paying dividends: Effect of profitability and cash flow volatility

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  • Sheikh, Shahbaz

Abstract

This study empirically investigates the relation between CEO power and the likelihood of dividend payouts. It argues that powerful CEOs pay dividends to establish reputation in capital markets to raise external financing at favorable terms. The net expected value of such reputation, however, depends on the likelihood of external financing, which is positively related to low profitability and high cash flow volatility. Empirical results show that powerful CEOs are more likely to pay and increase dividends when their firms face low profitability and high cash flow volatility.

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  • Sheikh, Shahbaz, 2022. "CEO power and the likelihood of paying dividends: Effect of profitability and cash flow volatility," Journal of Corporate Finance, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:corfin:v:73:y:2022:i:c:s0929119922000293
    DOI: 10.1016/j.jcorpfin.2022.102186
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    Cited by:

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    More about this item

    Keywords

    CEO power; Dividends; Profitability; Cash flow volatility;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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