Dividend Policy and Systemic Vulnerability Risk

Does a firm’s vulnerability to systemic risk influence its dividend payout? We address this question, using two firm-specific measures of systemic risk vulnerability for 1,143 non-financial corporations, and find that firms with greater vulnerability to systemic risk tend to pay lower dividends. Systemic vulnerability risk impacts mainly on the dividend amount, and we find little evidence that it influences the decision to pay, initiate, increase, or omit a dividend. Similarly, the payout mix is unaffected. Our results are robust to the exclusion of the global financial crisis period of 2008-2009, different measures of dividends, and alternative measures of systemic risk vulnerability.