Dividend Clienteles Around the World: Evidence from Institutional Holdings
Miguel A. Ferreira
Nova School of Business and Economics; European Corporate Governance Institute (ECGI)
INSEAD - Finance
Pedro P. Matos
University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)
June 28, 2010
Marshall School of Business Working Paper No. FBE 35-09
We examine the relation between international institutional ownership and payout policy using a comprehensive data set of equity holdings from 37 countries over the years 2000-2007. We find that foreign institutional ownership is negatively associated with the likelihood that a firm pays dividends and the size of dividend payments. The greater the tax disadvantage of dividends to international investors, and the higher are transaction costs related to repatriating and reinvesting dividends, the more international investors push for fewer dividends. The results support the existence of dividend clienteles around the world. Finally, we find that firms that comply with foreign institutional shareholders preference for lower payouts are able to retain and invest more of their earnings.
Number of Pages in PDF File: 54
Keywords: Payout policy, Institutional investors, Dividend clienteles, Transaction costs
JEL Classification: G15, G23, G30, G34
Date posted: August 13, 2009 ; Last revised: June 28, 2010
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