ABSTRACT
This study contributes to the broader field of financial economics by highlighting the important role of the quality of political signals in shaping corporate financial strategies. Using a sample of 17,635 US firms over the period 2001–2021, this paper examines how corporate payouts respond to low-quality political signals. We find evidence that such signals trigger corporate precautionary behaviour, leading to more conservative payout policies. Given the stickiness of dividends, we find that firms prefer cutting share repurchases over cash dividends.
Acknowledgements
The authors would like to thank the three anonymous reviewers for their very insightful comments and suggestions.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 The coefficients between explanatory variables are generally low (below |0.4|), which indicate that our main findings do not suffer from serious multicollinearity problems. The results are not reported here but are available upon request.