Seeking Safety in Bad Times: Dividends and Risk Perception
Evgenia V. Golubeva
University of Oklahoma - Division of Finance
Vahap B. Uysal
University of Oklahoma
August 11, 2009
In this paper, we test whether varying investor desire for safety affects valuations and dividend payout policies in the time series. Specifically, we find that the market reactions to dividend initiations and dividend increases are higher, ceteris paribus, in times when investors are more likely to seek safety. In addition, dividend initiations and increases are higher and dividend-paying stocks have higher valuations relative to non-paying stocks during such times. Collectively, these findings suggest that investor desire for safety has an incremental and meaningful impact on valuations and payout policies.
Number of Pages in PDF File: 54
Keywords: dividend policy, dividend initiation, consumer confidence, investor sentiment
JEL Classification: G10, G14, G35working papers series
Date posted: February 25, 2009 ; Last revised: August 12, 2009
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