Krieger, Kevin and Lee, Bong-Soo and Mauck, Nathan (2012): Do Senior Citizens Prefer Dividends? Local Clienteles vs. Firm Characteristics.
Download (750Kb) | Preview
We examine the payout policy of U.S. firms over the period 1980-2008. Prior research indicates that firm characteristics, managerial preferences, and investor clienteles are all important factors in setting payout policy. Counter to the oft-reported positive relation between senior citizens and the use of dividends, our results indicate that senior citizens are either indifferent between dividends and repurchases or demand dividends and have no influence over firm policy. The evolution of firm characteristics, including the average firm size, age, and volatility of earnings over time best explains payout policy. Further, manager preference for flexibility drives the payout decision. JEL
|Item Type:||MPRA Paper|
|Original Title:||Do Senior Citizens Prefer Dividends? Local Clienteles vs. Firm Characteristics|
|Keywords:||Payout Policy, Clientele Effect|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G35 - Payout Policy
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
|Depositing User:||Nathan Mauck|
|Date Deposited:||07. Oct 2012 23:30|
|Last Modified:||20. Feb 2013 02:32|
Baffes, John, 1997, Explaining stationary variables with non-stationary regressors, Applied Economics Letters, Taylor and Francis Journals 41:1, 69-75.
Becker, Bo, Zoran Ivkovic, and Scott Weisbenner, 2011, Local dividend clienteles, Journal of Finance 66, 655-683.
Brav, Alon, John R. Graham, Campbell R. Harvey, and Roni Michaely, 2005, Payout policy in the 21st century, Journal of Financial Economics 77, 483-527.
Brav, Alon, John R. Graham, Campbell R. Harvey, and Roni Michaely, 2008, Managerial response to the May 2003 dividend tax cut, Financial Management 37, 611-624.
Coval, Joshua D., and Tobias J. Moskowitz, 1999, Home bias at home: Local equity preference in domestic portfolios, Journal of Finance 54, 1–39.
Coval, Joshua D., and Tobias J. Moskowitz, 2001, The geography of investment: Informed trading and asset prices, Journal of Political Economy 109, 811–841.
DeAngelo, Harry, and Linda DeAngelo, 2006, The irrelevance of the MM dividend irrelevance theorem, Journal of Financial Economics 79, 293-315.
DeAngelo, H., L. DeAngelo, and D.J. Skinner, 2004, Are dividends disappearing? Dividend concentrations and the consolidations of earnings, Journal of Financial Economics 72, 425-456.
Denis, David J., and Igor Osobov, 2008, Why do firms pay dividends? International evidence on the determinants of dividend policy, Journal of Financial Economics 89, 62-82.
Fama, Eugene F., and Kenneth R. French, 2001, Disappearing dividends: Changing firm characteristics or lower propensity to pay? Journal of Financial Economics 60, 3-43.
Fama, Eugene F., J. MacBeth, 1973, Risk, return, and equilibrium: Empirical tests, Journal of Political Economy 81, 607-636.
Graham, John R., and Alok Kumar, 2006, Do dividend clienteles exist? Evidence on dividend preferences of retail investors, Journal of Finance 61, 1305-1336.
Granger, C. W.J., and P. Newbold, 1974, Spurious regression in Econometrics, Journal of Econometrics 2, 111-120.
Grullon, Gustavo, Roni Michaely, and Bhaskaran Swaminathan, 2002, Are dividend changes a sign of firm maturity? Journal of Business 75, 387-424.
Grullon, Gustavo, and Roni Michaely, 2004, The information content of share repurchase programs, Journal of Finance 59, 651-680.
Guay, W. and J. Harford, 2000, The cash flow permanence and information content of dividend increases vs. repurchases, Journal of Financial Economics 57, 385-416.
Ha, Inbong, Gwangheon Hong, and Bong-Soo Lee, 2011, The Information content of dividends and share repurchases, Asia-Pacific Journal of Financial Studies 40:4, 519-551.
Hadri, Kaddour, 2000, Testing for stationarity in heterogeneous panel data, The Econometrics Journal 3, 148-161.
Healy, P.M., and K.G. Palepu, 1988, Earnings information conveyed by dividend initiations and omissions, Journal of Financial Economics 21, 149-175.
Im, Kyung So, M. Hashem Pesaran, and Yongcheol Shin, 2003, Testing for unit roots in heterogeneous panels, Journal of Econometrics 115, 53-74.
Ivkovic, Zoran, and Scott Weisbenner, 2005, Local does as local is: Information content of the geography of individual investors’ common stock investments, Journal of Finance 60, 267-306.
Jagannathan, M., C.P. Stephens and M.S. Weisbach, 2000, Financial flexibility and the choice between dividends and stock repurchases, Journal of Financial Economics 57, 355-384.
Kumar, Praveen, Bong-Soo Lee, 2001, Discrete dividend policy with permanent earnings, Financial Management 30:3, autumn, 55-76.
Lie, E., 2000, Excess funds and agency problems: An empirical study of incremental cash disbursement, Review of Financial Studies 13, 219-248.
Lee, Bong-Soo, 1996, Time-series implications of aggregate dividend behavior, Review of Financial Studies 9:2, 589-618.
Lee, Bong-Soo, Oliver M. Rui, 2007, Time-series behavior of share repurchases and dividends, Journal of Financial and Quantitative Analysis 42, 119-142.
Lee, Bong-Soo, Jungwon Suh, 2011, Cash holdings and share repurchase: International evidence, Journal of Corporate Finance (forthcoming).
Miller, Merton H., and Franco Modigliani, 1961, Dividend policy, growth, and the valuation of shares, Journal of Business 34, 411-433.
Scholz, John K., 1992, A direct examination of the dividend clientele hypothesis, Journal of Public Economics 49, 261–285.
Shefrin, Hersh, and Meir Statman, 1984, Explaining investor preference for cash dividends, Journal of Financial Economics 13, 253-282.
Shefrin, Hersh, and Richard H. Thaler, 1988, The behavioral life-cycle hypothesis, Economic Inquiry 26, 609-643.
Skinner, Douglas J., 2008, The evolving relation between earnings, dividends, and stock repurchases, Journal of Financial Economics 87, 582-609.
Thaler, Richard H., and Hersh M. Shefrin, 1981, An economic theory of self-control, Journal of Political Economy 89, 392–406.