Do Senior Citizens Prefer Dividends? Local Clienteles vs. Firm Characteristics

44 Pages Posted: 15 Mar 2012  

Kevin Krieger

University of West Florida

Bong-Soo Lee

Florida State University

Nathan Mauck

University of Missouri - Kansas City

Multiple version iconThere are 2 versions of this paper

Date Written: March 14, 2012

Abstract

We examine the payout policy of U.S. firms over the period 1980-2008. Prior research indicates that firm characteristics, managerial preferences, and investor clienteles are all important factors in setting payout policy. We examine the roles of these factors and seek to determine which drives the payout decision. Counter to the oft-reported positive relation between senior citizens and the use of dividends, our initial time-series analysis finds that the proportion of senior citizens is negatively related to firm propensity to pay dividends and is positively related to the use of repurchases. This negative relation between senior proportion and the use of dividends is explained by the evolution of firm characteristics, including the average firm size, age, and volatility of earnings over time. Changes in firm factors coincide with changes in the proportion of seniors. Our results indicate that senior citizens are either indifferent between dividends and repurchases or demand dividends and have no influence over firm policy. Further, manager preference for flexibility drives the payout decision.

Keywords: Payout Policy, Clientele Effect

JEL Classification: G35

Suggested Citation

Krieger, Kevin and Lee, Bong-Soo and Mauck, Nathan, Do Senior Citizens Prefer Dividends? Local Clienteles vs. Firm Characteristics (March 14, 2012). Available at SSRN: https://ssrn.com/abstract=2022085 or http://dx.doi.org/10.2139/ssrn.2022085

Kevin Krieger

University of West Florida ( email )

11000 University Parkway
Pensacola, FL 32514-5750
United States

Bong-Soo Lee

Florida State University ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-4713 (Phone)

HOME PAGE: http://www.cob.fsu.edu/fin/display_faculty_info.cfm?pID=401

Nathan Mauck (Contact Author)

University of Missouri - Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

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