Keeping up with the Joneses: Corporate Dividends and Common Institutional Blockholders

Thomas J. Chemmanur (), Zeyu Sun () and Jing Xie
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Thomas J. Chemmanur: Carroll School of Management, Boston College
Zeyu Sun: School of Accounting, Capital University of Economics and Business

No 202407, Working Papers from University of Macau, Faculty of Business Administration

Abstract: We find that firms are more inclined to distribute dividends when a larger fraction of other firms held by the same common institutional blockholder (CIB) have paid dividends. This effect also holds for the level of and the change in dividend payment. We establish causality using exogenous perturbations in peer relations. In particular, we show that the similarity in firms’ dividend policies becomes greater after the exogenous creation of new peer relations between them due to asset managers’ mergers and Russell index reconstitutions. The peer effect is stronger when peers have maintained relations with the focal firm for a longer period or when focal firms’ stock liquidity is higher. We also find that a CIB is more likely to vote against manager sponsored proposals in nondividend-paying investee firms if a larger proportion of the CIB’s other investee firms have paid dividends. Overall, our results provide fresh evidence of dividend clienteles.

Keywords: dividend policy; peer effects; common institutional blockholders; shareholder voting; dividend clienteles. (search for similar items in EconPapers)
JEL-codes: G20 G23 G35 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2024-06
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-sbm
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Published in UM-FBA Working Paper Series

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