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Dividends and Corporate Shareholders

66 Pages Posted: 5 Jun 2007  

Michael J. Barclay

University of Rochester - Simon School (Deceased)

Clifford G. Holderness

Boston College - Department of Finance

Dennis P. Sheehan

Pennsylvania State University

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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

Barclay, Michael J. and Holderness, Clifford G. and Sheehan, Dennis P., Dividends and Corporate Shareholders. Review of Financial Studies, Forthcoming. Available at SSRN:

Michael Barclay

University of Rochester - Simon School (Deceased)


Clifford Holderness (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-2768 (Phone)
617-277-8071 (Fax)

Dennis Sheehan

Pennsylvania State University ( email )

Smeal College of Business
University Park, PA 16802
United States
814-863-8512 (Phone)
814-865-3362 (Fax)

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