Working Paper: NBER ID: w15175
Authors: Bo Becker; Zoran Ivkovi; Scott Weisbenner
Abstract: We exploit demographic variation to identify the effect of dividend demand on corporate payout policy. Retail investors tend to hold local stocks and older investors prefer dividend-paying stocks. Together, these tendencies generate geographically-varying demand for dividends. Firms headquartered in areas in which seniors constitute a large fraction of the population are more likely to pay dividends, initiate dividends, and have higher dividend yields. We also provide indirect evidence as to why managers may respond to the demand for dividends from local seniors. Overall, these results are consistent with the notion that the investor base affects corporate policy choices.
Keywords: dividend demand; corporate payout policy; demographics; local investors
JEL Codes: G30; G35
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local seniors (J14) | probability of paying dividends (G35) |
| local seniors (J14) | probability of initiating dividends (G35) |
| local seniors (J14) | dividend yield (G35) |
| local seniors (J14) | corporate payout choices (G35) |
| local seniors (J14) | demand for dividends (G35) |
| demand for dividends (G35) | corporate payout policies (G35) |