A discrete choice model of dividend reinvestment plans: classification and prediction
We study 852 companies with dividend reinvestment plans in 1999 matched by total assets to 852 companies without such plans. We use discrete choice methods to predict the classification of these companies. We interpret the misclassified companies as being likely to switch their plan status. That is, if a firm's financial data suggest that a company should have had a dividend reinvestment plan in 1999 but did not, then we expect that it would be more likely to institute a plan than the other companies in the sample. Conversely, if it did have a plan but the financial data suggest that it should not, then we expect that the company would be more likely to drop the plan. We use data from 2004 to explore this conjecture and find evidence supporting it. Our model is an economically and statistically reliable predictor of changes in plan status. We also identify which variables have the most influence on a company's decision whether or not to offer a plan.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.frbatlanta.org/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Calhoun, Charles A & Deng, Yongheng, 2002. "A Dynamic Analysis of Fixed- and Adjustable-Rate Mortgage Terminations," The Journal of Real Estate Finance and Economics, Springer, vol. 24(1-2), pages 9-33, Jan.-Marc.
- Ryngaert, Michael, 1988. "The effect of poison pill securities on shareholder wealth," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 377-417, January.
- Shaffer, Sherrill, 1991.
"Aggregate deposit insurance funding and taxpayer bailouts,"
Journal of Banking & Finance,
Elsevier, vol. 15(4-5), pages 1019-1037, September.
- Sherrill Shaffer, 1990. "Aggregate deposit insurance funding and taxpayer bailouts," Working Papers 90-14, Federal Reserve Bank of Philadelphia.
- Myron S. Scholes & Mark A. Wolfson, 1989.
"Decentralized Investment Banking: The Case of Discount Dividend-Reinve stment and Stock-Purchase Plans,"
NBER Working Papers
3093, National Bureau of Economic Research, Inc.
- Scholes, Myron S. & Wolfson, Mark A., 1989. "Decentralized investment banking : The case of discount dividend-reinvestment and stock-purchase plans," Journal of Financial Economics, Elsevier, vol. 24(1), pages 7-35, September.
- Dammon, Robert M & Spatt, Chester S, 1992. " An Option-Theoretic Approach to the Valuation of Dividend Reinvestment and Voluntary Purchase Plans," Journal of Finance, American Finance Association, vol. 47(1), pages 331-47, March.
- Smith, Clifford Jr. & Watts, Ross L., 1992.
"The investment opportunity set and corporate financing, dividend, and compensation policies,"
Journal of Financial Economics,
Elsevier, vol. 32(3), pages 263-292, December.
- Smith, C.W. & Watts, R.L., 1992. "The Investment Oppotunity set and Corporate Financing, Dividend and Compensation Policies," Papers 92-02, Rochester, Business - Financial Research and Policy Studies.
- Peterson, Pamela P & Peterson, David R & Moore, Norman H, 1987. "The Adoption of New-Issue Dividend Reinvestment Plans and Shareholder Wealth," The Financial Review, Eastern Finance Association, vol. 22(2), pages 221-32, May.
- Todd, Janet M. & Domian, Dale L., 1997. "Participation rates of dividend reinvestment plans: Differences between utility and nonutility firms," Review of Financial Economics, Elsevier, vol. 6(2), pages 121-135.
When requesting a correction, please mention this item's handle: RePEc:fip:fedawp:2007-22. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector)
If references are entirely missing, you can add them using this form.