Institutional Holdings and Payout Policy
44 Pages Posted: 6 May 2002
Date Written: April 2002
We examine the relation between institutional holdings and payout policy in U.S. public firms. We find that payout policy affects institutional holdings. On average, institutions decrease their holdings after an increase in dividends and increase their holdings after an increase in repurchases. We do not find evidence that a change in institutional holdings causes firms to change their dividend or repurchase policy. Our results do not support models which predict that dividends attract institutional clientele, and models which predict that institutions cause firms to increase payout.
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