Appearing and Disappearing Dividends: The Link to Catering Incentives

Posted: 18 Sep 2003 Last revised: 13 Aug 2008

See all articles by Malcolm P. Baker

Malcolm P. Baker

Harvard Business School; National Bureau of Economic Research (NBER)

Jeffrey Wurgler

NYU Stern School of Business; National Bureau of Economic Research (NBER)

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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 (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: dividend, payout

JEL Classification: G35

Suggested Citation

Baker, Malcolm P. and Wurgler, Jeffrey A., Appearing and Disappearing Dividends: The Link to Catering Incentives. Harvard NOM Working Paper No. 03-51, Available at SSRN: https://ssrn.com/abstract=440180

Malcolm P. Baker (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
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HOME PAGE: http://www.people.hbs.edu/mbaker

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Jeffrey A. Wurgler

NYU Stern School of Business ( email )

Stern School of Business
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New York, NY 10012-1126
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212-995-4233 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~jwurgler/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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