The Shareholder Base and Payout Policy

Andriy Bodnaruk and Per Östberg
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Andriy Bodnaruk: University of Illinois at Chicago
Per Östberg: University of Zurich, Ecole Polytechnique Fédérale de Lausanne, and Swiss Finance Institute

No 12-11, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine the relation between the shareholder base and payout policy. Consistent with the idea that the shareholder base is related to the cost of external financing we find that firms with small shareholder bases have lower payout levels and maintain higher cash holdings. We show that undertaking an open market repurchase results in a significant reduction in the size of the shareholder base. Consequently, we find that firms with small shareholder bases are less likely to undertake a repurchase (reduce the shareholder base even further) and are more likely to pay special dividends.

Keywords: Payout Policy; Cost of Capital; Special Dividends; Repurchases; Asymmetric Information; Investor recognition (search for similar items in EconPapers)
JEL-codes: G14 G15 G35 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2012-02
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1211

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