Abstract

http://ssrn.com/abstract=1786434
 
 

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Corporate Payout Policy and Changes in Housing Prices


Kose John


New York University (NYU) - Department of Finance

Sara Xiaoya Ding


University of San Francisco - School of Management

Yang Ni


Shanghai Jiao Tong University (SJTU)

Samir Saadi


Queen's School of Business

March 1, 2011


Abstract:     
We study how corporate payout policy responds to changing investor tastes for non-dividend over dividend paying stocks following an increase in housing prices. Exploiting the cross-regional dispersion in housing prices within the U.S. market, we find a significant negative effect of growth in housing prices on local firm’s propensity to pay and to initiate dividends, and on its dividend yield, payout ratio as well as total payout. Such housing effect is particularly strong for small firms, young firms, volatile firms, and low profitability firms. Our findings are insensitive to the choice of model specification and estimation method. They are also robust to controlling for several firm-specific variables, macro-economic variables, market sentiment, and dividend premium (proxy for dividend catering). In contrast to recent criticisms against catering theory, we find that dividend premium loads positively at state level. Moreover, we report weaker market reactions to dividend changes when local housing prices increase. This study is the first to establish a relationship between growth in housing prices and corporate policy decisions. It also introduces geography as a determinant of payout policy.

Number of Pages in PDF File: 63

Keywords: Corporate Payout Policy, Housing Prices, Housing Wealth, Local Bias, Dividend Clientele, Geography and dividends

JEL Classification: G10, G14, G34, G39

working papers series


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Date posted: March 18, 2011 ; Last revised: March 18, 2012

Suggested Citation

John, Kose and Ding, Sara Xiaoya and Ni, Yang and Saadi, Samir, Corporate Payout Policy and Changes in Housing Prices (March 1, 2011). Available at SSRN: http://ssrn.com/abstract=1786434 or http://dx.doi.org/10.2139/ssrn.1786434

Contact Information

Kose John (Contact Author)
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)
Sara Xiaoya Ding
University of San Francisco - School of Management ( email )
San Francisco, CA 94117
United States
Yang Ni
Shanghai Jiao Tong University (SJTU) ( email )
KoGuan Law School
Shanghai 200030, Shanghai 200052
China
Samir Saadi
Queen's School of Business ( email )
Queen's University
Kingston
Ontario, Ontario K7L 3N6
Canada

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