Story notes contributed by Dr. Miran Hossain, Professor of Economics and Finance at the UNCW Cameron School of Business.
Miran Hossain, Ph.D., Assistant Professor of Finance at UNCW Cameron School of Business recently published a paper called “Managerial Social Capital and Dividend Smoothing” in the Journal of Corporate Finance, which is an A* ranked journal in ABDC ranking. The journal “aims to publish high quality, original manuscripts or shorter format papers in both theoretical and empirical corporate finance”.
Co-authored with Dr. Luis García-Feijóo and Dr. David Javakhadze of Florida Atlantic University in Boca Raton, Florida, the paper seeks to explain the nature of dividend stickiness and examines the implications of social capital, a managerial personal attribute. The main findings support the notion that managerial social capital is positively associated with dividend smoothing. In addition, the effect of social capital is stronger for financially constrained firms in relation to dividend stickiness.
According to Dr. Hossain, “Dividends are sticky in nature, meaning that corporations do not usually change their dividends. Despite the prevalence of dividend smoothing, research findings are inconclusive in explaining dividend stickiness. In this paper, we examine the effect of a previously overlooked managerial personal attribute, social capital, as a possible determinant of dividend smoothing. Using social networks information of corporate executives from BoardEx database, this study finds that managerial social capital is associated with a statistically and economically significant increase in dividend smoothing. Furthermore, social capital alleviates financial constraints, which increases a firm’s propensity to smooth dividends.
Findings of this study have important implications for corporate finance policy. Results imply that top corporate executives’ social networks may help mitigate financial constraint and thus achieve a smooth dividend policy”.
To read the full paper, click here.