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Passing the dividend baton: the impact of dividend policy on new CEOs' initial compensation

Passing the dividend baton: the impact of dividend policy on new CEOs' initial compensation
Passing the dividend baton: the impact of dividend policy on new CEOs' initial compensation
We examine how firms' dividend policy affects the initial compensation of their newly appointed CEOs. We focus on newly appointed CEOs to isolate the effect of dividends on compensation and to provide new insights into an aspect largely neglected by compensation research. We show that the dividend payout is positively related to new CEO compensation. Further, the positive effect of dividends is stronger for firms with no dividend cuts over the past two, three and four years, firms with relatively high institutional ownership, and those with strong boards, consistent with new CEOs receiving higher pay as compensation for greater dividend pressure.
0929-1199
458-481
Chen, Jie
7181526d-ec25-480e-a35e-37bf4616e131
Song, Wei
0d91b8a3-694b-469e-a15e-bba82dc5d090
Goergen, Marc
d700632f-e4cc-41a7-978f-56b53c7d3764
Chen, Jie
7181526d-ec25-480e-a35e-37bf4616e131
Song, Wei
0d91b8a3-694b-469e-a15e-bba82dc5d090
Goergen, Marc
d700632f-e4cc-41a7-978f-56b53c7d3764

Chen, Jie, Song, Wei and Goergen, Marc (2019) Passing the dividend baton: the impact of dividend policy on new CEOs' initial compensation. Journal of Corporate Finance, 56, 458-481. (doi:10.1016/j.jcorpfin.2019.04.004).

Record type: Article

Abstract

We examine how firms' dividend policy affects the initial compensation of their newly appointed CEOs. We focus on newly appointed CEOs to isolate the effect of dividends on compensation and to provide new insights into an aspect largely neglected by compensation research. We show that the dividend payout is positively related to new CEO compensation. Further, the positive effect of dividends is stronger for firms with no dividend cuts over the past two, three and four years, firms with relatively high institutional ownership, and those with strong boards, consistent with new CEOs receiving higher pay as compensation for greater dividend pressure.

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Accepted/In Press date: 8 April 2019
e-pub ahead of print date: 10 April 2019
Published date: 1 June 2019

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Local EPrints ID: 433988
URI: http://eprints.soton.ac.uk/id/eprint/433988
ISSN: 0929-1199
PURE UUID: 2157cf62-ab6d-4f82-a88e-a3ecd31db0dd

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Date deposited: 10 Sep 2019 16:30
Last modified: 28 Apr 2022 04:12

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Contributors

Author: Jie Chen
Author: Wei Song
Author: Marc Goergen

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