Framing and Disposition Effects in Stockholders' Dividend Preferences

20 Pages Posted: 21 Dec 2010 Last revised: 21 Mar 2012

Date Written: March 21, 2012


This paper investigates factors affecting stockholder dividend preferences. The optional dividends paid by Hong Kong firms provide a unique natural experiment for testing dividend preference in a tax free setting. When offered the opportunity to convert cash dividends to stock, investors exhibit a reverse disposition effect. Instead of realizing gains following positive returns they prefer converting to stock, and investors realize gains by keeping the cash when returns have been negative. In contrast when stockholders face an option to convert stock dividends for cash they consider the yield offered, but not stock risk and return. These results show how dividend preference is framed both by returns and by the type of choice offered.

Keywords: Kong, natural experiment, dividends, framing, disposition effect, mental accounts

JEL Classification: G35

Suggested Citation

Murray, James S., Framing and Disposition Effects in Stockholders' Dividend Preferences (March 21, 2012). Available at SSRN: or

James S. Murray (Contact Author)

Ara Institute of Canterbury ( email )

130 Madras Street
Christchurch, 8011
New Zealand

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics