Catering Effects in Corporate Dividend Policy: The International Evidence

30 Pages Posted: 8 Apr 2009

See all articles by Stephen P. Ferris

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business

Sanjiv Sabherwal

University of Texas at Arlington - Department of Finance and Real Estate

Date Written: April 6, 2009

Abstract

This study tests for the international presence of dividend catering across a sample of twenty-three countries. We find evidence of catering among firms incorporated in common law countries but not for those in civil law nations. Catering persists even after controlling for the effect of the firm's lifecycle. We conclude that when the legal regime and its accompanying set of investor protections permit, investors force dividends from managers, but they also attempt to extract such payouts indirectly by placing a high value on dividend paying firms. The relative failure of civil law firms to cater might be explained by idiosyncratic behaviors in the consumption of the private benefits of control or a lack of interest in responding to temporary market misevaluations of their equity.

Suggested Citation

Ferris, Stephen P. and Jayaraman, Narayanan and Sabherwal, Sanjiv, Catering Effects in Corporate Dividend Policy: The International Evidence (April 6, 2009). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1374024

Stephen P. Ferris (Contact Author)

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4389 (Phone)
404-894-6030 (Fax)

Sanjiv Sabherwal

University of Texas at Arlington - Department of Finance and Real Estate ( email )

Box 19449 UTA
Arlington, TX 76019
United States
817-272-3705 (Phone)
817-272-2252 (Fax)

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