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Dividends and Corporate Shareholders

Michael J. Barclay

University of Rochester - Simon School (Deceased)

Clifford G. Holderness

Boston College - Department of Finance

Dennis P. Sheehan

Pennsylvania State University

Review of Financial Studies, Forthcoming

Corporations uniquely have a tax preference for cash dividends. Nevertheless, dividends do not increase following trades of large-percentage blocks of stock from individuals to corporations. Moreover, although one-third of firms have corporate blockholders, 68% of these firms pay no dividends, and ownership is not clustered at levels that increase the tax benefits of dividends. These findings are not driven by the investing firms' tax rates or by agency problems. Instead, operating companies expand the target firms and pursue joint ventures. Dividends are lower with these investors. Financial investors are not attracted to dividend-paying firms and tend to be passive.

Number of Pages in PDF File: 66

Keywords: Dividends, Corporate Blockholders, Taxes

JEL Classification: G30, G32, G35

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Date posted: June 5, 2007  

Suggested Citation

Barclay, Michael J. and Holderness, Clifford G. and Sheehan, Dennis P., Dividends and Corporate Shareholders. Review of Financial Studies, Forthcoming. Available at SSRN: http://ssrn.com/abstract=991360

Contact Information

Michael J. Barclay
University of Rochester - Simon School (Deceased)
Clifford G. Holderness (Contact Author)
Boston College - Department of Finance ( email )
Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-2768 (Phone)
617-277-8071 (Fax)
Dennis P. Sheehan
Pennsylvania State University ( email )
Smeal College of Business
University Park, PA 16802
United States
814-863-8512 (Phone)
814-865-3362 (Fax)
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