Title

Stock Market Liquidity And Firm Dividend Policy

Abstract

We provide evidence of a link between firm dividend policy and stock market liquidity. In the cross section, owners of less (more) liquid common stock are more (less) likely to receive cash dividends. Predictions of the proportion of dividend payers based on 1963-1977 cross-sectional estimates account for most of the declining propensity of firms to pay dividends as documented by Fama and French (2001). Furthermore, historic liquidity is an important determinant of dividend initiations and omissions. Finally, we show that sensitivity of firm value to aggregate liquidity declines after dividend initiations, suggesting that investors view stock market liquidity and dividends as substitutes. COPYRIGHT 2007, SCHOOL OF BUSINESS ADMINISTRATION, UNIVERSITY OF WASHINGTON.

Publication Date

1-1-2007

Publication Title

Journal of Financial and Quantitative Analysis

Volume

42

Issue

2

Number of Pages

369-398

Document Type

Review

Personal Identifier

scopus

DOI Link

https://doi.org/10.1017/s0022109000003318

Socpus ID

34250897426 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/34250897426

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