Spillover Effects of Payouts on Asset Prices and Real Investment

57 Pages Posted: 14 Dec 2022 Last revised: 28 Aug 2023

See all articles by Simon Schmickler

Simon Schmickler

Princeton University

Pedro Tremacoldi-Rossi

Columbia University, Department of Economics

Date Written: October 16, 2022


This paper uses the reinvestment of corporate payouts by financial institutions as a nonfundamental shock to prices of other stocks held in the same portfolio. Exploiting the separation between announcement and payment dates, we find dividends, in particular, generate payment date price pressure, but no announcement date news spillovers. We estimate an asset demand elasticity of 1.25 and document a releveraging market feedback effect on investment, where firms respond to price increases by issuing debt and use the funds to invest. Through this mechanism, $10 paid in dividends by the average firm translates into $2 of investment at other firms.

Keywords: Institutional Investors, Price Pressure, Market Feedback Effects, Corporate Payouts

JEL Classification: G11, G12, G23

Suggested Citation

Schmickler, Simon and Tremacoldi-Rossi, Pedro, Spillover Effects of Payouts on Asset Prices and Real Investment (October 16, 2022). Available at SSRN: https://ssrn.com/abstract=4287300 or http://dx.doi.org/10.2139/ssrn.4287300

Simon Schmickler

Princeton University ( email )

Princeton, NJ
United States

HOME PAGE: http://simonschmickler.com

Pedro Tremacoldi-Rossi (Contact Author)

Columbia University, Department of Economics ( email )

3022 Broadway
New York, NY 10027
United States

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