Why Individual Investors Want Dividends

Ming Dong, Chris Robinson and Chris Veld ()
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Ming Dong: York University - Schulich School of Business
Chris Robinson: York University - Atkinson School of Administrative Studies

Finance from EconWPA

Abstract: The question of why individual investors want dividends is investigated by submitting a questionnaire to a Dutch investor panel. The respondents indicate that they want dividends partly because the cost of cashing in dividends is lower than the cost of selling shares. Their answers provide strong confirmation for the signaling theories of Bhattacharya (1979) and Miller and Rock (1985). They are inconsistent with the uncertainty resolution theory of Gordon (1961, 1962) and the agency theories of Jensen (1986) and Easterbrook (1984). The behavioral finance theory of Shefrin and Statman (1984) is not confirmed for cash dividends but is confirmed for stock dividends. Finally, our results indicate that individual investors do not tend to consume a large part of their dividends. This raises some doubt as to whether a reduction or elimination of dividend taxes will stimulate the economy.

Keywords: Dividends; individual investors; survey (search for similar items in EconPapers)
JEL-codes: G30 G35 G38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-fin
Date: 2004-12-04
Note: Type of Document - pdf; pages: 53
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http://129.3.20.41/eps/fin/papers/0412/0412009.pdf (application/pdf)

Related works:
Working Paper: Why individual investors want dividends (2003)
Journal Article: Why individual investors want dividends (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0412009

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