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Hot-Stove Effects: The Impact of CEO Past Corporate Experiences on Dividend Policy

Published online by Cambridge University Press:  28 June 2021

Matthew Faulkner Open the ORCID record for Matthew Faulkner [Opens in a new window]  and
Luis García-Feijóo
Matthew Faulkner*
Affiliation:
San José State University Lucas College of Business
Luis García-Feijóo
Affiliation:
Florida Atlantic University College of Business [email protected]
*
[email protected] (corresponding author)
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Abstract

The personal traits of chief executive officers (CEOs) have been found to influence corporate policy decisions. We examine the impact of CEO past corporate distress experiences on payout policy. CEOs who have experienced a distress event in their career, while working in a non-CEO position at a different firm, subsequently alter corporate payout policy once in the CEO position. They are less likely to pay dividends and repurchase shares, pay out lower levels of dividends, and are less likely to increase dividends. They further exhibit preference toward repurchases. Overall, we report that experience-driven conservatism affects payout policy, a novel finding in the literature.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 5 , August 2022 , pp. 1695 - 1726
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank Anup Agrawal (the referee) and gratefully acknowledge the helpful comments from Alice Bonaimé, David Javakhadze, and Dong Hyun Kim (discussant), as well as seminar participants at Florida Atlantic University, San José State University, East Carolina University, the University of Tennessee at Chattanooga, California State University at Northridge, Florida Gulf Coast University, and the Southern Finance Association (SFA) 2019 Annual Meeting.

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