The Effects of Shifting Dividend Regimes: An International Examination of the REIT Effect

Posted: 1 Dec 2010

See all articles by Dirk Brounen

Dirk Brounen

Erasmus University Rotterdam (EUR) - Department of Financial Management; Erasmus Research Institute of Management (ERIM); Tinbergen Institute

Ronald Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group; TiasNimbas Business School

Date Written: November 29, 2010

Abstract

This paper examines the effects of a drastic change in dividend payout policy on both the return and risk of firms stock. We focus on the listed real estate markets of Japan, U.K and U.S. where the adoption of a Real Estate Investment Trust (REIT) standard has imposed a payout policy of 90 percent of taxable income. This exogenous shift in the dividend regime allows us to empirically test asymmetric information and incomplete contract theories. In line with signaling models, our event study results show that after the REIT adoption, dividend announcements are no longer accompanied by significant stock price reactions. Moreover, the results of our risk decomposition analysis tell us that the increased dividend payout has lowered the discount rate risk of firms, which supports theories are based on agency-induced imperfections.

JEL Classification: G3

Suggested Citation

Brounen, Dirk and Mahieu, Ronald J., The Effects of Shifting Dividend Regimes: An International Examination of the REIT Effect (November 29, 2010). 46th Annual AREUEA Conference Paper. Available at SSRN: https://ssrn.com/abstract=1716955

Dirk Brounen (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Financial Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 1 0408 2371 (Phone)
+31 1 0408 9017 (Fax)

HOME PAGE: http://web.eur.nl/fbk/dep/dep5/faculty/dbrounen

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
120-551-3535 (Phone)

Ronald J. Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2430 (Phone)
+31 13 466 3280 (Fax)

HOME PAGE: http://center.uvt.nl/staff/mahieu/

TiasNimbas Business School ( email )

Warandelaan 2
Tilburg, North-Brabant 5071HS
Netherlands

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