Military CEOs and firm dividends and cash holdings

Purpose - The purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions. Design/methodology/approach - The authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects. Findings - The results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility. Originality/value - Overall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts.