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Local Dividend Clienteles

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  • Bo Becker
  • Zoran Ivković
  • Scott Weisbenner

Abstract

We exploit demographic variation to identify the effect of dividend demand on corporate payout policy. Retail investors tend to hold local stocks and older investors prefer dividend-paying stocks. Together, these tendencies generate geographically-varying demand for dividends. Firms headquartered in areas in which seniors constitute a large fraction of the population are more likely to pay dividends, initiate dividends, and have higher dividend yields. We also provide indirect evidence as to why managers may respond to the demand for dividends from local seniors. Overall, these results are consistent with the notion that the investor base affects corporate policy choices.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15175.

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Date of creation: Jul 2009
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Publication status: published as Bo Becker & Zoran Ivković & Scott Weisbenner, 2011. "Local Dividend Clienteles," Journal of Finance, American Finance Association, vol. 66(2), pages 655-683, 04.
Handle: RePEc:nbr:nberwo:15175

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Cited by:
  1. Pawan Jain & Quentin Chu, 2014. "Dividend clienteles: a global investigation," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 42(3), pages 509-534, April.
  2. Breuer, Wolfgang & Rieger, M. Oliver & Soypak, K. Can, 2014. "The behavioral foundations of corporate dividend policy a cross-country analysis," Journal of Banking & Finance, Elsevier, Elsevier, vol. 42(C), pages 247-265.
  3. Bo Becker & Henrik Cronqvist & Rüdiger Fahlenbrach, 2011. "Estimating the Effects of Large Shareholders Using a Geographic Instrument," NBER Working Papers 17393, National Bureau of Economic Research, Inc.
  4. Laura Kawano, 2014. "The Dividend Clientele Hypothesis: Evidence from the 2003 Tax Act," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 6(1), pages 114-36, February.
  5. Krieger, Kevin & Lee, Bong-Soo & Mauck, Nathan, 2012. "Do Senior Citizens Prefer Dividends? Local Clienteles vs. Firm Characteristics," MPRA Paper 41784, University Library of Munich, Germany.
  6. Jacob, Martin, 2010. "Taxation, Dividends, and Share Repurchases: Taking Evidence Global," Working Paper Series, Center for Fiscal Studies, Uppsala University, Department of Economics 2010:10, Uppsala University, Department of Economics.
  7. Ovtchinnikov, Alexei V. & Pantaleoni, Eva, 2012. "Individual political contributions and firm performance," Journal of Financial Economics, Elsevier, Elsevier, vol. 105(2), pages 367-392.
  8. Becker, Bo & Jacob, Marcus & Jacob, Martin, 2013. "Payout taxes and the allocation of investment," Journal of Financial Economics, Elsevier, Elsevier, vol. 107(1), pages 1-24.
  9. Kumar, Alok & Page, Jeremy K. & Spalt, Oliver G., 2011. "Religious beliefs, gambling attitudes, and financial market outcomes," Journal of Financial Economics, Elsevier, Elsevier, vol. 102(3), pages 671-708.
  10. Mathur, Ike & Singh, Manohar & Nejadmalayeri, Ali & Jiraporn, Pornsit, 2013. "How do bond investors perceive dividend payouts?," Research in International Business and Finance, Elsevier, Elsevier, vol. 27(1), pages 92-105.
  11. Massa, Massimo & Yasuda, Ayako & Zhang, Lei, 2013. "Supply uncertainty of the bond investor base and the leverage of the firm," Journal of Financial Economics, Elsevier, Elsevier, vol. 110(1), pages 185-214.
  12. García, Diego & Norli, Øyvind, 2012. "Geographic dispersion and stock returns," Journal of Financial Economics, Elsevier, Elsevier, vol. 106(3), pages 547-565.
  13. Hartzmark, Samuel M. & Solomon, David H., 2013. "The dividend month premium," Journal of Financial Economics, Elsevier, Elsevier, vol. 109(3), pages 640-660.
  14. John, Kose & Knyazeva, Anzhela & Knyazeva, Diana, 2011. "Does geography matter? Firm location and corporate payout policy," Journal of Financial Economics, Elsevier, Elsevier, vol. 101(3), pages 533-551, September.

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