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The impact of the catering theory and financial firms' characteristics on dividend decisions: the case of the French market

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  • Kamal Anouar

    ()
    (GRM - Groupe de Recherche en Management - Institut d'Administration des Entreprises (IAE) - Nice - Institut d'Administration des Entreprises (IAE) - Toulon - Université Sud Toulon Var : EA4711 - Université Nice Sophia Antipolis (UNS) : EA4711)

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    Abstract

    This article investigates the impact that prevailing investor demand for dividend payers and financial firm's characteristics have on the probability of starting or continuing to pay dividends. To test this prediction, we use probit regressions on panel data. The major finding that emerges from our analyses is: in large companies characterized by high profitability and low debt levels, investors' demand for dividend payers has a positive and significant impact on the probability that a manager will decide to pay positive dividends.

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    Bibliographic Info

    Paper provided by HAL in its series Working Papers with number halshs-00765931.

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    Date of creation: 17 Dec 2012
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    Handle: RePEc:hal:wpaper:halshs-00765931

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00765931
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    Related research

    Keywords: behavioral corporate finance; dividend; econometric of panel data; investor's irrationality.;

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    1. Shefrin, Hersh M. & Statman, Meir, 1984. "Explaining investor preference for cash dividends," Journal of Financial Economics, Elsevier, vol. 13(2), pages 253-282, June.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
    3. Jeffrey A. Wurgler & Malcolm P. Baker, 2001. "Market Timing and Capital Structure," Yale School of Management Working Papers ysm181, Yale School of Management.
    4. Ferris, Stephen P. & Jayaraman, Narayanan & Sabherwal, Sanjiv, 2009. "Catering effects in corporate dividend policy: The international evidence," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1730-1738, September.
    5. Elton, Edwin J & Gruber, Martin J, 1970. "Marginal Stockholder Tax Rates and the Clientele Effect," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 68-74, February.
    6. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
    7. Baker, Malcolm & Wurgler, Jeffrey, 2004. "Appearing and disappearing dividends: The link to catering incentives," Journal of Financial Economics, Elsevier, vol. 73(2), pages 271-288, August.
    8. Malcolm Baker & Jeffrey Wurgler, 2003. "A Catering Theory of Dividends," NBER Working Papers 9542, National Bureau of Economic Research, Inc.
    9. Poterba, James M & Summers, Lawrence H, 1984. " New Evidence that Taxes Affect the Valuation of Dividends," Journal of Finance, American Finance Association, vol. 39(5), pages 1397-1415, December.
    10. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
    11. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
    12. John, Kose & Williams, Joseph, 1985. " Dividends, Dilution, and Taxes: A Signalling Equilibrium," Journal of Finance, American Finance Association, vol. 40(4), pages 1053-70, September.
    13. Li, Wei & Lie, Erik, 2006. "Dividend changes and catering incentives," Journal of Financial Economics, Elsevier, vol. 80(2), pages 293-308, May.
    14. Malcolm Baker & Richard S. Ruback & Jeffrey Wurgler, 2004. "Behavioral Corporate Finance: A Survey," NBER Working Papers 10863, National Bureau of Economic Research, Inc.
    15. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-59, September.
    16. Hersh Shefrin, 2001. "Behavioral Corporate Finance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(3), pages 113-126.
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