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School of Economics and Finance

No. 936: Between Scylla and Charybdis: CEO Political Ideology, Dividends and Downsizing During the Pandemic

Ali Bayat , University of Aberdeen
Marc Goergen , IE University, Spain
Panagiotis Koutroumpis , Queen Mary University London
Xingjie Wei , University of Leeds

January 28, 2022

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We study whether CEO political ideology affected how S&P 500 firms reacted to the Covid-19 pandemic, an exogenous shock to demand and supply. We hypothesize that conservative CEOs are more likely to adopt shareholder-friendly than employee-friendly reactions to the pandemic. Hence, they should be more likely to downsize their workforce while maintaining dividends. In contrast, other CEOs should be less likely to meet dividend expectations and less likely to downsize. We find confirmation of this hypothesis. We also find that CEOs used the dividend forecasts for 2020 as their benchmark rather than the 2019 dividends to make their dividend decision.

J.E.L classification codes: G35, G34, M51

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

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