The Impact of Dividend Reinvestment Plans on Firm Payout Choices—Evidence from Real Estate Investment Trusts

36 Pages Posted: 20 Feb 2019

See all articles by Shaun A. Bond

Shaun A. Bond

UQ Business School

Yu-Jou Pai

Concordia University

Peng Wang

University of Cincinnati

Suyan Zheng

University of Cincinnati

Date Written: Spring 2019

Abstract

This study investigates whether firm dividend payout choices are influenced by the presence of a Dividend Reinvestment Plan (DRIP). Given that DRIPs help retain capital, we show that dividend‐paying firms with a DRIP will tend to pay a high dividend and maintain a stable payout policy. Using a multinomial logistic model, we show that in comparison to REITs without DRIPs, REITs with DRIPs have a higher payout ratio and are less likely to: (1) pay regular dividends with extra dividends and share repurchases, (2) distribute extra dividends, repurchase shares, yet omit regular dividends and (3) omit all payouts. In addition, we find that REITs with a capital‐retaining DRIP invest more aggressively and such increased investment activities are undertaken without raising the reliance on external financing.

Suggested Citation

Bond, Shaun Alexander and Pai, Yu-Jou and Wang, Peng and Zheng, Suyan, The Impact of Dividend Reinvestment Plans on Firm Payout Choices—Evidence from Real Estate Investment Trusts (Spring 2019). Real Estate Economics, Vol. 47, Issue 1, pp. 178-213, 2019, Available at SSRN: https://ssrn.com/abstract=3335361 or http://dx.doi.org/10.1111/1540-6229.12248

Shaun Alexander Bond (Contact Author)

UQ Business School ( email )

The University of Queensland
Brisbane, QLD 4072
Australia

Yu-Jou Pai

Concordia University ( email )

Montreal, Quebec
Canada

Peng Wang

University of Cincinnati ( email )

Cincinnati, OH 45221-0389
United States

Suyan Zheng

University of Cincinnati ( email )

Cincinnati, OH 45221-0389
United States

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