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Dividend Clienteles Around the World: Evidence from Institutional Holdings

54 Pages Posted: 13 Aug 2009 Last revised: 28 Jun 2010

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Massimo Massa

INSEAD - Finance

Pedro P. Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Date Written: June 28, 2010

Abstract

We examine the relation between international institutional ownership and payout policy using a comprehensive data set of equity holdings from 37 countries over the years 2000-2007. We find that foreign institutional ownership is negatively associated with the likelihood that a firm pays dividends and the size of dividend payments. The greater the tax disadvantage of dividends to international investors, and the higher are transaction costs related to repatriating and reinvesting dividends, the more international investors push for fewer dividends. The results support the existence of dividend clienteles around the world. Finally, we find that firms that comply with foreign institutional shareholders preference for lower payouts are able to retain and invest more of their earnings.

Keywords: Payout policy, Institutional investors, Dividend clienteles, Transaction costs

JEL Classification: G15, G23, G30, G34

Suggested Citation

Ferreira, Miguel A. and Massa, Massimo and Matos, Pedro P., Dividend Clienteles Around the World: Evidence from Institutional Holdings (June 28, 2010). Marshall School of Business Working Paper No. FBE 35-09. Available at SSRN: https://ssrn.com/abstract=1447573 or http://dx.doi.org/10.2139/ssrn.1447573

Miguel Almeida Ferreira

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Pedro P. Matos (Contact Author)

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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