CEO-employee pay ratio disclosure and dividend policy

Rajib Chowdhury; John A. Doukas

doi:10.1111/jfir.70008

CEO-employee pay ratio disclosure and dividend policy

Rajib Chowdhury
, John A. Doukas

School of Business Administration (Harrisburg)

Research output: Contribution to journal › Article › peer-review

Abstract

We examine whether and how the magnitude of the CEO pay ratio affects dividend policy in the context of inequality-averse investors. Our results demonstrate a positive association between the two and remain robust to endogeneity concerns. We find that the CEO pay ratios positively affect dividends irrespective of whether CEO compensation contracts motivate risk-averse or risk-taking policy choices. This non-diverse effect on dividend policy across CEOs with different pay structures contradicts previous studies and highlights the wealth effect resulting from the SEC mandate. Further analyses reveal a negative effect of the pay ratio on cash holdings and investment inefficiency.

Original language	English (US)
Journal	Journal of Financial Research
DOIs	https://doi.org/10.1111/jfir.70008
State	Accepted/In press - 2025

All Science Journal Classification (ASJC) codes

Accounting
Finance

Access to Document

10.1111/jfir.70008

Cite this

@article{ba5c8d17d02a48aba6ff317a388d728d,

title = "CEO-employee pay ratio disclosure and dividend policy",

abstract = "We examine whether and how the magnitude of the CEO pay ratio affects dividend policy in the context of inequality-averse investors. Our results demonstrate a positive association between the two and remain robust to endogeneity concerns. We find that the CEO pay ratios positively affect dividends irrespective of whether CEO compensation contracts motivate risk-averse or risk-taking policy choices. This non-diverse effect on dividend policy across CEOs with different pay structures contradicts previous studies and highlights the wealth effect resulting from the SEC mandate. Further analyses reveal a negative effect of the pay ratio on cash holdings and investment inefficiency.",

author = "Rajib Chowdhury and Doukas, \{John A.\}",

note = "Publisher Copyright: {\textcopyright} 2025 The Author(s). The Journal of Financial Research published by Wiley Periodicals LLC on behalf of The Southern Finance Association and the Southwestern Finance Association.",

year = "2025",

doi = "10.1111/jfir.70008",

language = "English (US)",

journal = "Journal of Financial Research",

issn = "0270-2592",

publisher = "Wiley-Blackwell Publishing Ltd",

}

TY - JOUR

T1 - CEO-employee pay ratio disclosure and dividend policy

AU - Chowdhury, Rajib

AU - Doukas, John A.

N1 - Publisher Copyright: © 2025 The Author(s). The Journal of Financial Research published by Wiley Periodicals LLC on behalf of The Southern Finance Association and the Southwestern Finance Association.

PY - 2025

Y1 - 2025

N2 - We examine whether and how the magnitude of the CEO pay ratio affects dividend policy in the context of inequality-averse investors. Our results demonstrate a positive association between the two and remain robust to endogeneity concerns. We find that the CEO pay ratios positively affect dividends irrespective of whether CEO compensation contracts motivate risk-averse or risk-taking policy choices. This non-diverse effect on dividend policy across CEOs with different pay structures contradicts previous studies and highlights the wealth effect resulting from the SEC mandate. Further analyses reveal a negative effect of the pay ratio on cash holdings and investment inefficiency.

AB - We examine whether and how the magnitude of the CEO pay ratio affects dividend policy in the context of inequality-averse investors. Our results demonstrate a positive association between the two and remain robust to endogeneity concerns. We find that the CEO pay ratios positively affect dividends irrespective of whether CEO compensation contracts motivate risk-averse or risk-taking policy choices. This non-diverse effect on dividend policy across CEOs with different pay structures contradicts previous studies and highlights the wealth effect resulting from the SEC mandate. Further analyses reveal a negative effect of the pay ratio on cash holdings and investment inefficiency.

UR - https://www.scopus.com/pages/publications/105013765615

UR - https://www.scopus.com/pages/publications/105013765615#tab=citedBy

U2 - 10.1111/jfir.70008

DO - 10.1111/jfir.70008

M3 - Article

AN - SCOPUS:105013765615

SN - 0270-2592

JO - Journal of Financial Research

JF - Journal of Financial Research

ER -

CEO-employee pay ratio disclosure and dividend policy

Abstract

All Science Journal Classification (ASJC) codes

Access to Document

Other files and links

Fingerprint

Cite this