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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26500
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| Title: | Why are dividends disappearing? An empirical analysis |
| Authors: | Baker, Malcolm
Wurgler, Jeffrey |
| Issue Date: | 14-Nov-2002 |
| Series/Report no.: | FIN-02-056 |
| Abstract: | We investigate the causes of time-series fluctuations in the propensity
to pay dividends, including the post-1978 decline documented by Fama and
French (2001). We consider explanations based on fluctuations in
dividend clienteles, agency problems, information asymmetries, executive
stock options, catering incentives, tax code awareness, and short-lived
idiosyncratic factors. To evaluate these explanations, we conduct three
styles of analysis. First, we count and classify influences on the
propensity to pay that were noted in the financial press. Second, we
examine time-series relationships between the propensity to pay and
proxies for the driving influences in the candidate explanations. Third,
we assess whether the candidate explanations are theoretically
compatible with related time-series patterns involving dividend policy.
Overall, the results are most consistent with the catering explanation.
Notably, catering incentives, as measured by the stock market
"dividend premium," roughly line up with the four trends in
the propensity to pay between 1963 and 2000 and are able to account for
the observed magnitude of the post-1978 decline. There is also evidence
that idiosyncratic factors, including the Nixon-era dividend controls
and the recent growth in options, affected the propensity to pay in
specific periods. |
| URI: | http://hdl.handle.net/2451/26500 |
| Appears in Collections: | Finance Working Papers
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