Dividend sentiment, catering incentives, and return predictability

Alok Kumar, Zicheng Lei and Chendi Zhang

Journal of Corporate Finance, 2022, vol. 72, issue C

Abstract: Using Internet search volume of dividend-related keywords to measure investor preference for dividends that varies over time and across states, we show that dividend sentiment affects corporate policies and asset prices. Investors search more for dividends when economic conditions are poor, with the peak volume reached during the recent COVID-19 pandemic. Firms initiate or increase dividends when dividend sentiment is stronger, especially in regions with strong dividend sentiment. Shifts in dividend sentiment predict higher investor demand for dividends and higher returns for high dividend stocks. Further, mutual funds that pay high dividends receive more inflows when dividend sentiment is stronger.

Keywords: Dividend catering; Investor attention; Internet search volume; Dividend sentiment; Return predictability (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:72:y:2022:i:c:s0929119921002509

DOI: 10.1016/j.jcorpfin.2021.102128

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