The valuation effect of stock dividends or splits: Evidence from a catering perspective

Conghui Hu, Yu-Jane Liu and Xin Xu

Journal of Empirical Finance, 2021, vol. 61, issue C, 163-179

Abstract: We hypothesize that managers use stock dividends or splits to cater to gambling investors who are willing to pay a premium for stocks with lottery-like features. Using proprietary account-level trading records, we find that retail investors, particularly those with a strong gambling preference, become strong net buyers following the announcement of stock dividends, while professional investors unload their holdings. Moreover, we find that positive market reactions to stock dividends is positively associated with increases in gambling investors.

Keywords: Stock dividends or splits; Catering; Gambling preferences; Clientele effect (search for similar items in EconPapers)
JEL-codes: G14 G35 G39 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:61:y:2021:i:c:p:163-179

DOI: 10.1016/j.jempfin.2021.01.006

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