The Shareholder Base and Payout Policy

Abstract:     
We examine the relation between the shareholder base and payout policy. Consistent with the idea that the shareholder base is related to the cost of external …financing we …find that fi…rms with small shareholder bases have lower payout levels and maintain higher cash holdings. We show that undertaking an open market repurchase results in a signi…cant reduction in the size of the shareholder base. Consequently, we …find that …firms with small shareholder bases are less likely to undertake a repurchase (reduce the shareholder base even further) and are more likely to pay special dividends.

Number of Pages in PDF File: 62

Keywords: Payout Policy, Cost of Capital, Special Dividends, Repurchases, Asymmetric Information, Investor recognition.

JEL Classification: G35, G14, G15

working papers series