The catering theory of dividends on the US stock markets
Journal Title: Zarządzanie i Finanse - Year 2013, Vol 11, Issue 2
Abstract
Fama and French [Fama, French, 2001] document that the proportion of dividend-paying firms has been declining in the United States since 1960s. Baker and Wurgler [Baker, Wurgler, 2004a, 2004b, 2012] suggest that these appearing and disappearing dividends are an out-come of firms catering to transient fads for dividend paying stocks. We revisit the problem and add to the discussion in several ways. Firstly, we exclude from our sample small market capitalization and low-profitability companies. We argue that those small companies have limited capacity to run a dividend policy targeted at catering temporal preferences of investors, and at the same time they are highly sensitive to other valuation factors. Secondly, we assume that managers of non-paying firms need a full year to observe and to react to misevaluation of dividend payers, and to initiate dividend payments in their own firms. Thirdly, we investigate if the number of dividend payers is significantly greater in periods when the market performance was particularly disappointing. After excluding the small capitalization and low profitability firms, we confirm in our sample that the proportion of dividend-payers has been declining over the years. Parallel, we document general tendency of decreasing dividend premium. We attribute the short-term volatility in dividend premium to changes in investor sentiment. We show that managers tend to cater to those changes, however with a delay. We find statistically significant positive correlation between the value of dividend premium in a given year and the proportion of dividend-payers in the next year. We find no preferences of investors for the dividend paying companies in years of poor market performance.
Authors and Affiliations
Przemysław Konieczka, Adam Szyszka
Keywords
Related Articles
- EP ID EP136688
- DOI -
- Views 71
- Downloads 0
The analysis of policies and instruments employed to support development of clusters in Poland
This paper explores various aspects of working out and implementing development policies based on clusters (cluster-based policies – CBPs). The clusters are a recognized tool that can be employed for increasing com...
The diversity of business sector in terms of structural change and economic situation in Poland in 2004–2013 – the national and regional approach
The purpose of this paper is the identification of development trends in the corporate sector in Poland (with particular emphasis on small- and medium-sized enterprises in comparison with changes in the entire enterprise...
Efektywność inwestowania na przykładzie spółek giełdowych z sektora energetycznego, paliwowego i surowcowego
Celem artykułu było zbadanie efektywności inwestowania na GPW w Warszawie na przykładzie spółek wchodzących w skład indeksów sektorowych: WIG energia, WIG paliwa i WIG surowce. Za pomocą wybranych metod wielowymiarowej a...
Risk as Opportunity and Threat in Business Activities of A Company
An analysis of changes taking place in the environment of a company shows an increase not only in the number of environment components but also in intensification of their influence on a company. In other words, b...
Interdyscyplinarność nauk o jakości
Celem tego artykułu jest ukazanie kategorii jakości w jej wymiarze uniwersalnym oraz w podstawowych eksplikacjach jakości dziedzinowych (specjalistycznych), a zwłaszcza w naukach filozoficznych, ekonomicznych, techniczny...