Finance Research Seminar – Dr Periklis Boumparis

Title: Sovereign Ceilings and Corporate Payouts: How Rating Constraints Shape Dividend Policy

Date: 24 September 2025

Time: 15:00-16:00

Venue: FDC.1.17

If you would like to attend, please register using the following link:

Sovereign Ceilings and Corporate Payouts: How Rating Constraints Shape Dividend Policy

Speaker:   Dr Periklis Boumparis

Periklis Boumparis is a Lecturer in Finance and DPD of the M.Sc. in Banking and Finance at Newcastle University Business School. He holds a Ph.D. in Finance from the University of Liverpool, and an M.Sc. in Economics from the University of Macedonia, Thessaloniki, Greece. Prior to joining NUBS, he was an Assistant Professor in Finance at Trinity Business School, Trinity College Dublin. His current research interests include Corporate Finance and Sustainable Finance. His research has been published in a range of leading journals, including the Journal of Corporate Finance, Journal of International Money and Finance, International Review of Financial Analysis and the Economics Letters. He is also an active reviewer for leading journals in my field of research and have contributed to LSE blogs and the Greek newspaper “Kathimerini”.

Abstract:

This study investigates how credit rating downgrades affect dividend policies. We exploit the sovereign ceiling rule, which prevents corporate credit ratings from exceeding their country’s sovereign rating, to identify exogenous variation in corporate credit ratings. Following a sovereign downgrade, we find that ‘bound’ firms, those with credit ratings equal to or higher than the respective sovereign rating, reduce dividend distributions relative to other domestic firms. The effect is more pronounced in countries with weaker creditor and shareholder rights and among firms that relied on external financing for payouts prior to the downgrade. Additional analysis confirms the parallel trends assumption, as bound firms show no differential dividend policy before the sovereign downgrade year. Our results remain robust across a series of tests, including alternative measures of dividend policy, falsification tests addressing macroeconomic shocks unrelated to sovereign downgrades and controls for differences in credit quality. This study enhances our understanding of corporate payout policy by highlighting how sovereign credit constraints influence firms’ payout decisions through the sovereign ceiling channel.