Dividend Sentiment, Catering Incentives, and Return Predictability

63 Pages Posted: 26 Nov 2016 Last revised: 1 Mar 2019

See all articles by Alok Kumar

Alok Kumar

University of Miami - School of Business Administration

Zicheng Lei

University of Surrey - Finance and Accounting Group

Chendi Zhang

University of Warwick - Finance Group

Date Written: December 20, 2018

Abstract

Using Internet search volume of dividend-related keywords as a direct measure of investor preference for dividends (i.e., dividend sentiment), we show that dividend sentiment is high when economic conditions are poor. Mutual funds that pay high dividends receive more inflows when dividend sentiment is stronger. Further, firms initiate or increase dividends when dividend sentiment is stronger, especially in regions with strong dividend sentiment. We find similar results for share repurchases. Shifts in dividend sentiment predict higher demand for dividends and higher returns for high dividend stocks. Collectively, these results suggest that dividend sentiment affects corporate policies and asset prices.

Keywords: Dividend catering; investor attention; Internet search volume; dividend sentiment; return predictability.

JEL Classification: G32; G35

Suggested Citation

Kumar, Alok and Lei, Zicheng and Zhang, Chendi, Dividend Sentiment, Catering Incentives, and Return Predictability (December 20, 2018). WBS Finance Group Research Paper 2875114; University of Miami Business School Research Paper No. 2875114. Available at SSRN: https://ssrn.com/abstract=2875114 or http://dx.doi.org/10.2139/ssrn.2875114

Alok Kumar (Contact Author)

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Zicheng Lei

University of Surrey - Finance and Accounting Group ( email )

63MS02, Rik Medlik Building
Surrey Business School
Guildford, Surrey GU2 7XH
United Kingdom
01483686372 (Phone)

Chendi Zhang

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

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