A Servant to Many Masters: Competing Shareholder Preferences and Limits to Catering

Posted: 17 Mar 2008 Last revised: 9 Oct 2011

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Date Written: September 9, 2009


We study what determines catering through payout policy, and how the ability to cater affects firm policies. We create a catering index, measuring the extent to which the firm caters to its investors’ payout preferences. Catering is constrained by market segmentation and dispersion in investor payout preferences. The ability to cater grants the firm better equity financing conditions: catering firms experience a smaller stock price drop when issuing equity, and a positive market reaction to dividend announcements. Investors react to an increase in catering by raising their investment in the firm. Firms that cater have lower leverage, and invest more through capital expenditures and acquisitions.

Keywords: Payout policy, mutual funds, catering

JEL Classification: G30, G35

Suggested Citation

Massa, Massimo and Manconi, Alberto, A Servant to Many Masters: Competing Shareholder Preferences and Limits to Catering (September 9, 2009). EFA 2009 Bergen Meetings Paper; AFA 2010 Atlanta Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1098169

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
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+33 1 6072 4045 (Fax)

Alberto Manconi (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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