The Shareholder Base and Payout Policy

62 Pages Posted: 26 Mar 2008 Last revised: 1 Feb 2014

Andriy Bodnaruk

University of Illinois at Chicago

Per Östberg

University of Zurich - Department of Banking and Finance; Ecole Polytechnique Fédérale de Lausanne - Ecole Polytechnique Fédérale de Lausanne

Date Written: February 12, 2012

Abstract

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.

Keywords: Payout Policy, Cost of Capital, Special Dividends, Repurchases, Asymmetric Information, Investor recognition.

JEL Classification: G35, G14, G15

Suggested Citation

Bodnaruk, Andriy and Östberg, Per, The Shareholder Base and Payout Policy (February 12, 2012). AFA 2009 San Francisco Meetings Paper; Swiss Finance Institute Research Paper No. 12-11. Available at SSRN: https://ssrn.com/abstract=1107118 or http://dx.doi.org/10.2139/ssrn.1107118

Andriy Bodnaruk

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Per Östberg (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
CH-8032 Zurich, Zurich 8032
Switzerland
+41 44 6342956 (Phone)

Ecole Polytechnique Fédérale de Lausanne - Ecole Polytechnique Fédérale de Lausanne ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

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