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Journal of Corporate Finance Vol. 90 2025

The impact of CEO political ideology on labor cost reductions and payout decisions during the COVID-19 pandemic

Ali Bayat1; Marc Goergen2,3; Panagiotis Koutroumpis4; Xingjie Wei5

1 University of Aberdeen · 2 IE University · 3 European Corporate Governance Institute · 4 University of Sussex · 5 University of Leeds

open access

Abstract

Using a hand-collected dataset, we study whether CEO political ideology affected S&P 500 firms’ reactions to the COVID-19 pandemic in 2020. During the pandemic, CEOs had the option to distribute the pain of the pandemic’s impact onto shareholders by paying lower dividends, onto the workforce by reducing labor costs, or to share the pain. We hypothesize that conservative CEOs were more likely to aggressively reduce labor costs while still meeting dividend expectations. Conversely, other CEOs would have been less likely to meet dividend expectations and less likely to reduce labor costs. Our findings support this hypothesis. We also find that during the pandemic, conservative CEOs used temporary downsizing to avoid earnings losses, enabling them to meet dividend expectations.

DOI
10.1016/j.jcorpfin.2024.102692
Volume
90
Pages
102692
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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