Dividend Sentiment, Catering Incentives, and Return Predictability

Kumar, Alok; Lei, Zicheng; Zhang, Chendi

doi:10.2139/ssrn.2875114

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Dividend Sentiment, Catering Incentives, and Return Predictability

Journal of Corporate Finance, Vol. 72, No. 102128, 2022

62 Pages Posted: 26 Nov 2016 Last revised: 20 Dec 2021

See all articles by Alok Kumar

Alok Kumar

University of Miami - Miami Herbert Business School

Chendi Zhang

University of Exeter Business School

Date Written: September 2, 2021

Abstract

Using Internet search volume of dividend-related keywords to measure investor preference for dividends that varies over time and across states, we show that dividend sentiment affects corporate policies and asset prices. Investors search more for dividends when economic conditions are poor, with the peak volume reached during the recent COVID-19 pandemic. Firms initiate or increase dividends when dividend sentiment is stronger, especially in regions with strong dividend sentiment. Shifts in dividend sentiment predict higher investor demand for dividends and higher returns for high dividend stocks. Further, mutual funds that pay high dividends receive more inflows when dividend sentiment is stronger.

Keywords: Dividend catering; investor attention; Internet search volume; dividend sentiment; return predictability.

JEL Classification: G32; G35

Suggested Citation: Suggested Citation

Kumar, Alok and Lei, Zicheng and Zhang, Chendi, Dividend Sentiment, Catering Incentives, and Return Predictability (September 2, 2021). Journal of Corporate Finance, Vol. 72, No. 102128, 2022, Available at SSRN: https://ssrn.com/abstract=2875114 or http://dx.doi.org/10.2139/ssrn.2875114