EconPapers    
Economics at your fingertips  
 

A Catering Theory of Dividends

Malcolm Baker and Jeffrey Wurgler ()

No 9542, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a theory in which the decision to pay dividends is driven by investor demand. Managers cater to investors by paying dividends when investors put a stock price premium on payers and not paying when investors prefer nonpayers. To test this prediction, we construct four time series measures of the investor demand for dividend payers. By each measure, nonpayers initiate dividends when demand for payers is high. By some measures, payers omit dividends when demand is low. Further analysis confirms that the results are better explained by the catering theory than other theories of dividends.

JEL-codes: G35 (search for similar items in EconPapers)
Date: 2003-03
New Economics Papers: this item is included in nep-cfn and nep-fin
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Published as Baker, Malcolm and Jeffrey Wurgler. "A Catering Theory Of Dividends," Journal of Finance, 2004, v59(3,Jun), 1125-1165.

Downloads: (external link)
http://www.nber.org/papers/w9542.pdf (application/pdf)

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:nbr:nberwo:9542

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9542

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-06-10
Handle: RePEc:nbr:nberwo:9542