Reinvesting Dividends

87 Pages Posted: 27 Jul 2022 Last revised: 21 Apr 2024

See all articles by Jan Müller-Dethard

Jan Müller-Dethard

University of Mannheim

Niklas Reinhardt

University of Kiel - Institute for Quantitative Business and Economics Research (QBER)

Martin Weber

University of Mannheim - Department of Banking and Finance

Date Written: November 20, 2023

Abstract

It is a long-standing fact that retail investors have high dividend consumption rates (~75%) and low reinvestment rates (~20%). In a German brokerage dataset, we find the opposite: 80% reinvestments and 12% consumption. Of these reinvestments, the majority occurs with a delay after dividends are initially parked as brokerage cash. Motivated by this finding, we study payout modalities (deposits into brokerage accounts, checking accounts, or checks) as a novel mechanism that nudges investors towards reinvesting or consuming dividends. Using six datasets, we provide evidence that our mechanism ties together previous research and that our results generalize to many retail investors.

Keywords: dividend reinvestment, brokerage cash, choice architecture, mental accounting, default effects, retail investors

JEL Classification: D14, G11, G40, G41, G50, G51

Suggested Citation

Müller-Dethard, Jan and Reinhardt, Niklas and Weber, Martin, Reinvesting Dividends (November 20, 2023). Available at SSRN: https://ssrn.com/abstract=4164208 or http://dx.doi.org/10.2139/ssrn.4164208

Jan Müller-Dethard

University of Mannheim ( email )

Department of Finance, L9, 1-2
Mannheim, 68131
Germany

Niklas Reinhardt (Contact Author)

University of Kiel - Institute for Quantitative Business and Economics Research (QBER) ( email )

Olshausenstr. 75
Kiel, 24118
Germany

HOME PAGE: http://www.qber.uni-kiel.de/

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
237
Abstract Views
1,673
Rank
244,080
PlumX Metrics