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Political sentiment and corporate payouts

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  • Hossain, Ashrafee
  • Benkraiem, Ramzi
  • Krishnamurti, Chandrasekhar

Abstract

We provide empirical evidence of the impact of firm-level political sentiment on dividend policy. Using a sample composed of over 34,000 firm years, we find that a high level of political sentiment is associated with a lower level of dividend payout. The evidence is robust and survives several tests that address potential endogeneity. Our results suggest that managers consider investors' political sentiment in setting dividend policy. When political sentiment is negative, they pay higher dividends to assuage investors' concerns regarding future prospects. Our results are also consistent with the view that firms pay higher dividends to address the agency cost issue that arises from the free cash flow problem during periods of negative political sentiment.

Suggested Citation

  • Hossain, Ashrafee & Benkraiem, Ramzi & Krishnamurti, Chandrasekhar, 2025. "Political sentiment and corporate payouts," International Review of Financial Analysis, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:finana:v:102:y:2025:i:c:s1057521925001656
    DOI: 10.1016/j.irfa.2025.104078
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    Keywords

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    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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