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Stakeholder orientation and corporate payout policy: Insights from state legal shocks

Stakeholder orientation and corporate payout policy: Insights from state legal shocks
Stakeholder orientation and corporate payout policy: Insights from state legal shocks
We employ a difference-in-differences estimation approach to examine the impact of stakeholder orientation on corporate payout policy. The empirical test exploits the enactment of US state-level constituency statutes, which allow directors to consider stakeholders and long-term interests in corporate decision making. We find that firms incorporated in states that have adopted constituency statutes significantly reduce share repurchases, whereas the effects of statute enactment on total payout and dividend payments are marginal and insignificant, respectively. We further show that the negative statute effect on share repurchases is more pronounced for firms that are in financial distress or are close to default, and firms in consumer-focused and high-polluting industries. Overall, our findings indicate that promoting stakeholder orientation can have a significant impact on corporate payout decisions.
Constituency statutes, Payout Decision, Share Repurchases, Stakeholder orientation
0378-4266
Ni, Xiaoran
c0e00a24-f34a-4395-aa1b-dcdfe3c747cf
Song, Wei
0d91b8a3-694b-469e-a15e-bba82dc5d090
Yao, Jiaquan
3d0fb778-1fe0-4bbd-a9d7-c7ef99023bdd
Ni, Xiaoran
c0e00a24-f34a-4395-aa1b-dcdfe3c747cf
Song, Wei
0d91b8a3-694b-469e-a15e-bba82dc5d090
Yao, Jiaquan
3d0fb778-1fe0-4bbd-a9d7-c7ef99023bdd

Ni, Xiaoran, Song, Wei and Yao, Jiaquan (2020) Stakeholder orientation and corporate payout policy: Insights from state legal shocks. Journal of Banking & Finance, 121, [105970]. (doi:10.1016/j.jbankfin.2020.105970).

Record type: Article

Abstract

We employ a difference-in-differences estimation approach to examine the impact of stakeholder orientation on corporate payout policy. The empirical test exploits the enactment of US state-level constituency statutes, which allow directors to consider stakeholders and long-term interests in corporate decision making. We find that firms incorporated in states that have adopted constituency statutes significantly reduce share repurchases, whereas the effects of statute enactment on total payout and dividend payments are marginal and insignificant, respectively. We further show that the negative statute effect on share repurchases is more pronounced for firms that are in financial distress or are close to default, and firms in consumer-focused and high-polluting industries. Overall, our findings indicate that promoting stakeholder orientation can have a significant impact on corporate payout decisions.

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Stakeholder Orientation and Corporate Payout Policy_Insights from State Legal Shocks - Accepted Manuscript
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Accepted/In Press date: 3 October 2020
e-pub ahead of print date: 4 October 2020
Keywords: Constituency statutes, Payout Decision, Share Repurchases, Stakeholder orientation

Identifiers

Local EPrints ID: 444280
URI: http://eprints.soton.ac.uk/id/eprint/444280
ISSN: 0378-4266
PURE UUID: 11a7e778-875d-439a-99a0-ef7f9de2031b

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Date deposited: 08 Oct 2020 16:41
Last modified: 28 Apr 2022 04:36

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Contributors

Author: Xiaoran Ni
Author: Wei Song
Author: Jiaquan Yao

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