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CEO dividend protection

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  • Zhang, Dan

Abstract

This paper studies CEO dividend protection, an important element in the executive compensation package that protect CEOs’ compensation from stock price drops due to dividend payments. First, I show that there is large variation among S&P 500 firms in whether they provide dividend protections to their CEOs or not. Second, CEO dividend protection is positively associated with firms’ dividend payout. Third, a time series analysis suggests that dividend protection is implemented prior to a firm increasing dividends. Finally, there is no evidence suggesting that CEO dividend protection affects other corporate policies, such as cash holdings and investment.

Suggested Citation

  • Zhang, Dan, 2018. "CEO dividend protection," Journal of Empirical Finance, Elsevier, vol. 45(C), pages 194-211.
    • Handle: RePEc:eee:empfin:v:45:y:2018:i:c:p:194-211
    DOI: 10.1016/j.jempfin.2017.10.005
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    Cited by:

    1. Grey, Colette & Flynn, Antoinette & Donnelly, Ray, 2020. "Management compensation contracts and distribution policies in the US technology sector," International Review of Financial Analysis, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Payout policy; Executive compensation; CEO dividend protection;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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