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Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Why individual investors want dividends
Author(s): Dong, Ming
Robinson, Chris
Veld, Chris
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Keywords: dividends
individual investor
Issue Date: Dec-2005
Citation: Dong M, Robinson C & Veld C (2005) Why individual investors want dividends. Journal of Corporate Finance, 12 (1), pp. 121-158.
Abstract: The question of why individual investors want dividends is investigated by submitting a questionnaire to a Dutch investor panel. The respondents indicate that they want dividends partly because the cost of cashing in dividends is lower than the cost of selling shares. Their answers provide strong confirmation for the signaling theories of Bhattacharya (1979) and Miller and Rock (1985). They are inconsistent with the uncertainty resolution theory of Gordon (1961, 1962) and the agency theories of Jensen (1986) and Easterbrook (1984). The behavioral finance theory of Shefrin and Statman (1984) is not confirmed for cash dividends but is confirmed for stock dividends. Finally, our results indicate that individual investors do not tend to consume a large part of their dividends. This raises some doubt as to whether a reduction or elimination of dividend taxes will stimulate the economy.
DOI Link: 10.1016/j.jcorpfin.2004.04.006
Rights: Published in Journal of Corporate Finance by Elsevier.

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