Managerial Overconfidence and Dividend Stickiness

Jui Chia Lin, Min Teh Yu*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

In this study, we examine whether overconfident CEOs strive to smooth dividends. Our findings show overconfident CEOs increase dividends more as earnings increase and decrease dividends less as earnings decline, resulting in downward dividend stickiness. This asymmetric dividend payout is consistent with the selective self-attribution bias. Furthermore, the effect of managerial overconfidence on dividend stickiness is more pronounced for firms without catering incentives. In addition, overconfident CEOs do not manage share repurchases as they do for dividends. Therefore, we do not find a positive effect of managerial overconfidence on total payout stickiness.

Original languageEnglish
JournalJournal of Accounting, Auditing and Finance
DOIs
StateAccepted/In press - 2023

Keywords

  • catering theory
  • dividend stickiness
  • managerial overconfidence
  • selective self-attribution bias
  • total payout

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