Between Scylla and Charybdis: CEO Political Ideology, Dividends and Downsizing During the Pandemic

54 Pages Posted: 7 Dec 2021 Last revised: 16 May 2022

See all articles by Ali Bayat

Ali Bayat

University of Aberdeen

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Panagiotis Koutroumpis

Queen Mary University London

Xingjie Wei

University of Leeds - Faculty of Business

Date Written: November 30, 2021

Abstract

Using a proprietary dataset, we study whether CEO political ideology affected how S&P 500 firms reacted to the Covid-19 pandemic. We hypothesize that conservative CEOs are more likely to downsize their workforce while meeting dividend expectations. Conversely, other CEOs should be less likely to meet dividend expectations and less likely to downsize. The evidence supports this hypothesis. We also find that conservative CEOs use temporary downsizing to avoid an earnings loss, which in turn enables them meet dividend expectations. Importantly, CEOs used the dividend forecasts for 2020 as their benchmark rather than the 2019 dividends to make their dividend decision.

Keywords: CEO political ideology, dividend policy, downsizing, stakeholder management, Covid-19 pandemic

JEL Classification: G35,G34,M51

Suggested Citation

Bayat, Ali and Goergen, Marc and Koutroumpis, Panagiotis and Wei, Xingjie, Between Scylla and Charybdis: CEO Political Ideology, Dividends and Downsizing During the Pandemic (November 30, 2021). European Corporate Governance Institute – Finance Working Paper No. 802/2021, Available at SSRN: https://ssrn.com/abstract=3977042 or http://dx.doi.org/10.2139/ssrn.3977042

Ali Bayat

University of Aberdeen ( email )

King's College
Aberdeen, AB24 3FX
United Kingdom

HOME PAGE: http://https://www.abdn.ac.uk/business/people/profiles/ali.bayat

Marc Goergen (Contact Author)

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Panagiotis Koutroumpis

Queen Mary University London ( email )

Office GC 3.32
Graduate Centre, Mile End Campus
London, E14NS
United Kingdom
02078825872 (Phone)

HOME PAGE: http://www.pkoutroumpis.com

Xingjie Wei

University of Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

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