A Discrete Choice Model of Dividend Reinvestment Plans: Classification and Prediction

Managerial and Decision Economics, Vol. 32, 2011

Posted: 28 Dec 2011

See all articles by Thomas P. Boehm

Thomas P. Boehm

University of Tennessee, Knoxville - Department of Finance

Ramon P. DeGennaro

University of Tennessee, Knoxville - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 28, 2011

Abstract

We develop a discrete choice recursive model that classifies companies with and without dividend reinvestment plans with 72.0% accuracy. Misclassified companies are more likely to switch their plan status within the next five years, suggesting that financial statements foreshadow changes in plan status. Companies that add dividend reinvestment plans tend to have more extreme levels of variables that control for management entrenchment, higher levels of variables that control for the ability to pay dividends and higher payout ratios.

Keywords: dividends, dividend reinvestment plan, discrete choice models

JEL Classification: G35, G10, G19, G20, G29

Suggested Citation

Boehm, Thomas P. and DeGennaro, Ramon P., A Discrete Choice Model of Dividend Reinvestment Plans: Classification and Prediction (June 28, 2011). Managerial and Decision Economics, Vol. 32, 2011, Available at SSRN: https://ssrn.com/abstract=1977495

Thomas P. Boehm

University of Tennessee, Knoxville - Department of Finance ( email )

Knoxville, TN 37996
United States
615-974-3216 (Phone)
615-974-1716 (Fax)

Ramon P. DeGennaro (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

423 Stokely Management Center
Knoxville, TN 37996
United States
865-974-1726 (Phone)
865-974-1716 (Fax)

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