Media coverage and corporate payout policy

Abstract

Using a sample combining various datasets over the period 2000 to 2012, this paper examines the relationship between media coverage and payout policy in US public firms. I find that media coverage is negatively associated with a firm’s likelihood of paying dividends and positively associated with the decisions to cut and omit dividends. Firms with high media coverage also have a lower level of dividend smoothing. These findings are based on a relatively representative sample and persist after accounting for contemporaneous repurchasing activities, different combinations of firm characteristic control variables, and industry, time and firm fixed effects. Moreover, I also find that investors react less negatively to the dividend cut announcements of high coverage firms. Overall, my results suggest that, as higher media coverage attracts more potential investors to a stock, managers become less conservative regarding dividend policy.