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Managerial Social Capital and Dividends: Evidence from the UK

Author

Listed:
  • Omar Al-Bataineh

    (Kent Business School, University of Kent, Canterbury CT2 7FS, UK
    Department of Business Administration, The Hashemite University, P.O. Box 330127, Zarqa 13133, Jordan)

  • Abdullah Iqbal

    (Kent Business School, University of Kent, Canterbury CT2 7FS, UK)

  • Timothy King

    (School of Accounting and Finance, University of Vaasa, Wolffintie 32, FI-65200 Vaasa, Finland)

Abstract

We examine the relationship between managerial social capital (MSC) and firms’ dividend policies. For an unbalanced panel of publicly listed UK FTSE 350 firms from 2006 to 2017, we find that MSC has a negative impact on a firm’s dividend policy. Firms pay lower dividends when a higher proportion of well-connected directors join corporate boards. Our main result is consistent with the notion that a high degree of social capital leads to better monitoring and control; therefore, social capital works under the substitution effect between governance quality and dividend payouts. In further analyses, we explore potential differences in this relationship between financial and non-financial firms and show that the association between MSC and dividend policy is weaker in financial firms than in non-financial firms. Taken together, our findings infer that investors should consider the social capital status of firms when they make investment decisions. Our results proved to be robust when subjected to a battery of tests, including alternative model specifications and definitions of MSC.

Suggested Citation

  • Omar Al-Bataineh & Abdullah Iqbal & Timothy King, 2024. "Managerial Social Capital and Dividends: Evidence from the UK," JRFM, MDPI, vol. 17(12), pages 1-25, December.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:12:p:560-:d:1544328
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    References listed on IDEAS

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