Does a CEO’s ability to hedge affect the firm’s payout policy?

We examine whether a CEO’s composition of firm stockholdings between restricted and unrestricted shares impacts the firm’s payout policy. We document a positive and statistically significant relationship between measures of payout policy and the proportion of CEO total shareholdings that are unrestricted, and this positive relationship holds for alternative measures of payout. This result supports the notion that the composition of a CEO’s portfolio of firm stock between restricted and unrestricted shares is a significant determinant of the firm’s payout policy.