Dividends and Corporate Shareholders

Authors: Barclay, Michael J.; Holderness, Clifford G.; Sheehan, Dennis P.

Source: Review of Financial Studies, Volume 22, Number 6, 26 June 2009 , pp. 2423-2455(33)

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Abstract:

Corporations uniquely have a tax preference for cash dividends. Nevertheless, dividends do not increase following trades of large-percentage blocks of stock from individuals to corporations. Moreover, although one-third of firms have corporate blockholders, 68 of these firms pay no dividends, and ownership is not clustered at levels that increase the tax benefits of dividends. These findings are not driven by the investing firms tax rates or by agency problems. Instead, operating companies expand the target firms and pursue joint ventures. Dividends are lower with these investors. Financial investors are not attracted to dividend-paying firms and tend to be passive.

Keywords: G30; G32; G35

Document Type: Research article

DOI: http://dx.doi.org/10.1093/rfs/hhn060

Publication date: 2009-06-26

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The Review of Financial Studies is a major forum for the promotion and wide dissemination of significant new research in financial economics. As reflected by its broadly based editorial board, the Review balances theoretical and empirical contributions. The primary criteria for publishing a paper are its quality and importance to the field of finance, without undue regard to its technical difficulty. Finance is interpreted broadly to include the interface between finance and economics. The Review is sponsored by The Society for Financial Studies. The editors of the Review and officers of the Society are elected for limited terms.