What is the purpose of a corporation? While common law, which prevails in Anglo-Saxon countries, prescribes that the purpose of a firm is to maximize shareholder value, other legal systems tend to accord at least some importance to stakeholders other than the shareholders. For example, the German corporate law system explicitly refers to employee interests while making employee representation on boards of directors mandatory subject to firm size. While such countrywide explanations are useful in answering the question about what the purpose of a corporation should be, they are not helpful for furthering our understanding of the reasons behind the observed heterogeneity in the behaviour of firms from the same legal regime. For example, why do some firms from the same legal regime follow a more shareholder-centric approach while others prioritize the welfare of their employees over their shareholder? Importantly, how do these differences in approach affect firm policy? Read more here.
Ever wondered how a CEO's political ideology influences their company's payout policy? In my latest study with Ali Bayat, we find that conservative CEOs are not only more likely to pay dividends, but they also pay higher dividends and often combine them with share repurchases. Interestingly, these payouts are typically funded by drawing on cash reserves and cutting back on capital and R&D spending. Our full study will be published soon in the Journal of Banking and Finance. You can read it here . A podcast summarising the study is available from here .
Comments
Post a Comment