Dividend Neutrality with Transaction Costs

Gur Huberman

The Journal of Business, 1990, vol. 63, issue 1, S93-106

Abstract: The author constructs an intertemporal model in which investors trade shares of a firm. All trading is done through competitive market makers. After the initial period and before the end of the planning horizon, information is asymmetrically distributed among traders, and the prices of investors who buy shares are higher than for those who sell shares. The presence of this deviation from the Walrasian paradigm notwithstanding, dividend policy does not affect the initial period's share price or shareholders' welfare. This result is robust to various extensions of the model. The author also considers fixed administrative transaction costs and shows that dividend policy is irrelevant in the presence of these transaction costs. Copyright 1990 by the University of Chicago.

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/00219398/.61-.67 full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:63:y:1990:i:1:p:s93-106

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().