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Appearing and Disappearing Dividends: The Link to Catering IncentivesMalcolm P. BakerHarvard Business School; National Bureau of Economic Research (NBER) Jeffrey WurglerNYU Stern School of Business; National Bureau of Economic Research (NBER) Harvard NOM Working Paper No. 03-51 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 Accepted Paper SeriesDate posted: September 18, 2003 ; Last revised: August 13, 2008Suggested CitationContact Information
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