Do Dividend Clienteles Exist? Evidence on Dividend Preferences of Retail Investors

37 Pages Posted: 2 Jan 2004

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Alok Kumar

University of Miami - School of Business Administration

Date Written: April 28, 2005

Abstract

We study stock holdings and trading behavior of more than 60,000 households and find evidence consistent with dividend clienteles. Retail investor stock holdings indicate a preference for dividend yield that increases with age and decreases with income, consistent with age and tax clienteles, respectively. Trading patterns reinforce this evidence: Older, low-income investors disproportionally purchase stocks before the ex-dividend day. Furthermore, among small stocks, the ex-day price drop decreases with age and increases with income, consistent with clientele effects. Finally, consistent with the behavioral attention hypothesis, we document that older and low-income investors purchase stocks following dividend announcements.

Keywords: Retail investors, Dividend clienteles, Dividend events, Dividend taxation, Attention hypothesis

JEL Classification: G11, G14, G35, H24

Suggested Citation

Graham, John Robert and Kumar, Alok, Do Dividend Clienteles Exist? Evidence on Dividend Preferences of Retail Investors (April 28, 2005). Available at SSRN: https://ssrn.com/abstract=482563 or http://dx.doi.org/10.2139/ssrn.482563

John Robert Graham

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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

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