Abstract
Using a hand-collected dataset, we study whether CEO political ideology affected how S&P 500 firms reacted to the Covid-19 pandemic. CEOs had to choose between two evils, i.e. falling short of investors’ expected dividends and downsizing their workforce. We hypothesize that conservative CEOs were more likely to downsize their workforce while meeting dividend expectations. Conversely, other CEOs would have been less likely to meet dividend expectations and less likely to downsize. The evidence supports this hypothesis. We also find that conservative CEOs use temporary downsizing to avoid earnings losses, which in turn enables them meet dividend expectations.