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Shareholder Preferences and Dividend Policy

Author

Listed:
  • Michael J. Brennan

    (University of California, Los Angeles)

  • Anjan V. Thakor

    (Olin School of Business, Washington University)

Abstract

This paper develops a theory of choice among alternative procedures for distributing cash from corporations to shareholders. Despite the preferential tax treatment of capital gains for individual investors, it is shown that a majority of a firm's shareholders may support a dividend payment for small distributions. For larger distributions an open market stock repurchase is likely to be preferred by a majority of shareholders, and for the largest distributions tender offer repurchases dominate.

Suggested Citation

  • Michael J. Brennan & Anjan V. Thakor, 2004. "Shareholder Preferences and Dividend Policy," Finance 0411017, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpfi:0411017
    Note: Type of Document - pdf; pages: 27
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    References listed on IDEAS

    as
    1. Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
    2. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
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    6. Dybvig, Philip H & Zender, Jaime F, 1991. "Capital Structure and Dividend Irrelevance with Asymmetric Information," Review of Financial Studies, Society for Financial Studies, vol. 4(1), pages 201-219.
    7. Ofer, Aharon R & Thakor, Anjan V, 1987. " A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends," Journal of Finance, American Finance Association, vol. 42(2), pages 365-394, June.
    8. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-1177, December.
    9. 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 411-411.
    10. Verrecchia, Robert E, 1982. "Information Acquisition in a Noisy Rational Expectations Economy," Econometrica, Econometric Society, vol. 50(6), pages 1415-1430, November.
    11. Ambarish, Ramasastry & John, Kose & Williams, Joseph, 1987. " Efficient Signalling with Dividends and Investments," Journal of Finance, American Finance Association, vol. 42(2), pages 321-343, June.
    12. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    13. Ho, Thomas S. Y. & Michaely, Roni, 1988. "Information Quality and Market Efficiency," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(01), pages 53-70, March.
    14. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
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    JEL classification:

    • G - Financial Economics

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