| This dissertation empirically examines the implications of the managerial entrenchment hypothesis for a firm's dividend policy and the resulting market reactions to the managerial characteristics.; In Chapter 1, we design and implement an econometric methodology to test some of the main predictions of the managerial entrenchment literature by focusing on the CEO. Using a binary choice mode, our result shows that, compared to the weak-type CEOs, the strong-type CEOs will: (1) have higher percentage of performance-related compensation; (2) hold more shares in their firm; and (3) have worked fewer years in their position. In addition, our study shows that the stock repurchase is a complementary payout method to the existing cash dividend.; The evidence from our analysis is generally consistent with the predictions of the managerial entrenchment literature. Our model is also quite successful in predicting the classification of firms into dividend-paying and non-dividend-paying groups.; In Chapter 2, we investigate the announcement effect of dividend changes. While controlling for managerial entrenchment related variables, our result shows that the long-term (twelve-month) cumulative (CAR) and buy-and-hold (BHAR) abnormal returns are positively associated with the quality of the announcing firm's current investment opportunity set and negatively associated with dividend yield and debt-to-equity ratio at the firm level. The size of the firm contributes negatively to the measure of abnormal returns over the sample period. In general, our analysis shows that studies of dividend changes need to incorporate the managerial characteristics into the analysis. |
