{"title":"Dividends on Unearned Shares and Corporate Payout Policy: An Analysis of Dividend Equivalent Rights","authors":"Z. Tingting Jia, Don M. Chance","doi":"10.1142/s2010139222500136","DOIUrl":null,"url":null,"abstract":"<p>We investigate a little-known executive compensation device called dividend equivalents, which are provisions on some options and performance-based equity awards permitting executives to receive dividends on shares not owned and which they may ultimately never own. We find that up to 30% of sample firms have had this policy. While dividend equivalents may appear to exacerbate agency problems, they have a positive impact on cash holdings and help align incentives — firms with dividend equivalent policies tend to pay dividends, and firms that make dividend equivalent payments tend to pay higher dividends and keep lower excess cash.</p>","PeriodicalId":45339,"journal":{"name":"Quarterly Journal of Finance","volume":null,"pages":null},"PeriodicalIF":0.9000,"publicationDate":"2022-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Quarterly Journal of Finance","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.1142/s2010139222500136","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate a little-known executive compensation device called dividend equivalents, which are provisions on some options and performance-based equity awards permitting executives to receive dividends on shares not owned and which they may ultimately never own. We find that up to 30% of sample firms have had this policy. While dividend equivalents may appear to exacerbate agency problems, they have a positive impact on cash holdings and help align incentives — firms with dividend equivalent policies tend to pay dividends, and firms that make dividend equivalent payments tend to pay higher dividends and keep lower excess cash.
期刊介绍:
The Quarterly Journal of Finance publishes high-quality papers in all areas of finance, including corporate finance, asset pricing, financial econometrics, international finance, macro-finance, behavioral finance, banking and financial intermediation, capital markets, risk management and insurance, derivatives, quantitative finance, corporate governance and compensation, investments and entrepreneurial finance.