Title

CEO and CFO equity compensation and dividend payout over the firm lifecycle

Publication Name

Global Finance Journal

Abstract

We examine the separate and joint effects of CEO and CFO equity compensation on the dividend payout decision, taking into account changes in the relationship over the firm's lifecycle. Compensation contracts and dividend payout both are used to reduce agency costs, which change over a firm's lifecycle. Studies report a negative association between CEO equity compensation and dividend payout, suggesting a substitutionary relationship. Our results show that when the two are considered jointly, CFO equity compensation dominates CEO compensation, indicating the need for sophisticated financial expertise in the dividend decision. The relationship appears only in mature firms, signifying that agency problems are of most concern during the mature stage of the firm lifecycle.

Open Access Status

This publication is not available as open access

Volume

49

Article Number

100562

Funding Sponsor

University of Western Australia

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Link to publisher version (DOI)

http://dx.doi.org/10.1016/j.gfj.2020.100562