The Shareholder Base and Payout Policy
University of Illinois at Chicago
University of Zurich - Department of Banking and Finance; Ecole Polytechnique Fédérale de Lausanne - Ecole Polytechnique Fédérale de Lausanne
February 12, 2012
AFA 2009 San Francisco Meetings Paper
Swiss Finance Institute Research Paper No. 12-11
We examine the relation between the shareholder base and payout policy. Consistent with the idea that the shareholder base is related to the cost of external financing we find that fi rms with small shareholder bases have lower payout levels and maintain higher cash holdings. We show that undertaking an open market repurchase results in a signi cant reduction in the size of the shareholder base. Consequently, we find that firms with small shareholder bases are less likely to undertake a repurchase (reduce the shareholder base even further) and are more likely to pay special dividends.
Number of Pages in PDF File: 62
Keywords: Payout Policy, Cost of Capital, Special Dividends, Repurchases, Asymmetric Information, Investor recognition.
JEL Classification: G35, G14, G15
Date posted: March 26, 2008 ; Last revised: February 1, 2014