The quality of political signals and corporate payouts

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.