Publications
Publications
- August 2004
- Journal of Financial Economics
Appearing and Disappearing Dividends: The Link to Catering Incentives
By: Malcolm Baker and Jeffrey Wurgler
Abstract
We document a close link between fluctuations in the propensity to pay dividends and catering incentives. First, we use the methodology of Fama and French (J. Finan. Econ. (2001)) to identify a total of four distinct trends in the propensity to pay dividends between 1963 and 2000. Second, we show that each of these trends lines up with a corresponding fluctuation in catering incentives: The propensity to pay increases when a proxy for the stock market dividend premium is positive and decreases when it is negative. The lone disconnect is attributable to Nixon-era controls.
Keywords
Dividends; Payout Policy; Catering; Dividend Premium; Investor Sentiment; Investment Return; Motivation and Incentives; Trends; Stocks; Financial Services Industry
Citation
Baker, Malcolm, and Jeffrey Wurgler. "Appearing and Disappearing Dividends: The Link to Catering Incentives." Journal of Financial Economics 73, no. 2 (August 2004): 271–288.