Do Co-Opted Directors Influence Dividend Policy?

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50 Scopus citations


We explore how co-opted directors affect dividend policy. Co-opted directors are those appointed after the incumbent chief executive officer (CEO) assumes office. Our results show that co-opted directors lead to a weaker propensity to pay dividends and, for dividend-paying firms, significantly lower dividend payouts. We also show that board co-option has more explanatory power for dividend policy than does the traditional measure of board effectiveness, that is, board independence. Exploiting the passage of the Sarbanes-Oxley Act as a natural experiment, we show that the effect of board co-option on dividend policy is more likely causal, rather than merely an association.

Original languageEnglish (US)
Pages (from-to)349-381
Number of pages33
JournalFinancial Management
Issue number2
StatePublished - Jun 1 2018

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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