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  • August 2004
  • Article
  • Journal of Financial Economics

Appearing and Disappearing Dividends: The Link to Catering Incentives

By: Malcolm Baker and Jeffrey Wurgler
  • Format:Print
  • | Pages:18
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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.

About The Author

Malcolm P. Baker

Finance
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