Demographics, dividend clienteles and the dividend premium
AbstractThe catering theory of dividends proposed that corporate dividend policy is driven by prevailing investor demand for dividend payers, and that managers cater to investors by paying dividends when the dividend premium is high. While earlier research found that the dividend premium is not driven by traditional clienteles derived from market imperfections such as taxes, transaction costs, or institutional investment constraints, we find empirical evidence that demographic clienteles are an important source of the time-varying demand for dividend payers. In particular, we find that, as consistent with the behavioural life-cycle theory and the marginal opinion theory of stock price, the dividend premium is positively driven by demographic clientele variation represented by changes in the proportion of the older population. Our results are robust when controlled for the factors of investor sentiment, signalling, agency costs, tax clienteles, time trend, business cycle fluctuations and varying sample periods.
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Bibliographic InfoArticle provided by Elsevier in its journal The Quarterly Review of Economics and Finance.
Volume (Year): 51 (2011)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/inca/620167
Dividend policy; Demographics; Dividend premium; Dividend clienteles;
Other versions of this item:
- Lee, King Fuei, 2010. "Demographics, dividend clienteles and the dividend premium," MPRA Paper 34546, University Library of Munich, Germany.
- G00 - Financial Economics - - General - - - General
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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