The More, the Merrier: An International Analysis of the Frequency of Dividend Payment

23 Pages Posted: 2 Feb 2010

See all articles by Stephen P. Ferris

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Gregory Noronha

University of Washington, Tacoma - Milgard School of Business

Emre Unlu

University of Nebraska at Lincoln

Abstract

The joint contributions of prospect theory and mental accounting imply that investors receive a higher utility when a given level of dividends is paid more frequently, suggesting that dividends should be paid as often as possible. We document a strong positive relationship between payment frequency and firm value, confirmed with an event study of dividend payment frequency changes. Upon examining the frequency with which dividends are paid around the world, we discover that considerable variation exists, and that dividends are not paid as often as behavioral aspects suggest they should. From our multivariate analysis, we determine that non-behavioral factors such as the legal regime as well as the level and standard deviation of operating income exert significant influences on the payment frequency of dividends, suggesting that a tradeoff exists between behavioral and non-behavioral factors. The relationship between payment frequency and firm value remains robust in the presence of these non-behavioral factors.

Suggested Citation

Ferris, Stephen P. and Noronha, Gregory and Unlu, Emre, The More, the Merrier: An International Analysis of the Frequency of Dividend Payment. Journal of Business Finance & Accounting, Vol. 37, Nos. 1-2, pp. 148-170, January/March 2010. Available at SSRN: https://ssrn.com/abstract=1546161 or http://dx.doi.org/10.1111/j.1468-5957.2009.02174.x

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)

Gregory Noronha

University of Washington, Tacoma - Milgard School of Business ( email )

1900 Commerce Street
Campus Box 358420
Tacoma, WA 98402-3100
United States

Emre Unlu

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

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