In this study, we examine the effects of geopolitical risk on corporate payout policy. Exploiting a news-based
index of geopolitical risk, we find that firms adopt a more conservative payout policy by reducing share
repurchases in response to greater geopolitical risk, whereas the effects of geopolitical risk on cash dividends ...
In this study, we examine the effects of geopolitical risk on corporate payout policy. Exploiting a news-based
index of geopolitical risk, we find that firms adopt a more conservative payout policy by reducing share
repurchases in response to greater geopolitical risk, whereas the effects of geopolitical risk on cash dividends are
insignificant. Further analysis suggests that cash flow uncertainty and financial distress risk are two potential
channels through which geopolitical risk affects corporate payout policy. We also show that the effects of
geopolitical risk on share repurchase are more pronounced for firms with greater exposure to product market
competition and those facing higher threats of financial distress. Overall, our study emphasizes the implications
of geopolitical risk for corporate payout choice.