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Optimal dividend distribution policy from the perspective of the impatient and loss-averse investor

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  • Yang, Yang
  • Shoji, Isao
  • Kanehiro, Sumei

Abstract

This paper discusses a problem concerning intertemporal decision-making under uncertainty when its subject has psychological biases. Here, we consider an investment company as a decision maker that invests money from investors in a financial asset and pays some dividend every period depending on the performance of the investment. On the other hand, we assume investors have such psychological biases as inconsistent time preference and loss aversion. Through numerical experiments we show that the optimal dividend distribution under inconsistent time preference and loss aversion is quite different from the distribution without these psychological factors, and that combinations of the two factors produce various patterns of dividend distribution.

Suggested Citation

  • Yang, Yang & Shoji, Isao & Kanehiro, Sumei, 2009. "Optimal dividend distribution policy from the perspective of the impatient and loss-averse investor," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(3), pages 534-540, June.
  • Handle: RePEc:eee:soceco:v:38:y:2009:i:3:p:534-540
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    References listed on IDEAS

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    7. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1039-1061.
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    Cited by:

    1. 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, vol. 42(C), pages 247-265.

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