Dividends and Corporate Shareholders

Barclay, Michael J.; Holderness, Clifford G.; Sheehan, Dennis P.

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Dividends and Corporate Shareholders

Review of Financial Studies, Forthcoming

66 Pages Posted: 5 Jun 2007

See all articles by Michael J. Barclay

Michael J. Barclay

University of Rochester - Simon School (Deceased)

Dennis P. Sheehan

Pennsylvania State University

There are 2 versions of this paper

Abstract

Corporations uniquely have a tax preference for cash dividends. Nevertheless, dividends do not increase following trades of large-percentage blocks of stock from individuals to corporations. Moreover, although one-third of firms have corporate blockholders, 68% of these firms pay no dividends, and ownership is not clustered at levels that increase the tax benefits of dividends. These findings are not driven by the investing firms' tax rates or by agency problems. Instead, operating companies expand the target firms and pursue joint ventures. Dividends are lower with these investors. Financial investors are not attracted to dividend-paying firms and tend to be passive.

Keywords: Dividends, Corporate Blockholders, Taxes

JEL Classification: G30, G32, G35

Suggested Citation: Suggested Citation

Barclay, Michael J. and Holderness, Clifford G. and Sheehan, Dennis P., Dividends and Corporate Shareholders. Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=991360