Appearing and Disappearing Dividends: The Link to Catering Incentives
NBER Working Paper No. 9995
We document a close link between fluctuations in the propensity to pay dividends and catering incentives. First, we use the methodology of Fama and French (2001) to identify a total of four distinct trends in the propensity to pay dividends between 1963 and 2000. Second, we show that each of these trends lines up with a corresponding fluctuation in catering incentives: The propensity to pay increases when a proxy for the stock market dividend premium is positive and decreases when it is negative. The lone disconnect is attributable to Nixon-era controls.
Published: Baker, Malcolm and Jeffrey Wurgler. "Appearing And Disappearing Dividends: The Link To Catering Incentives," Journal of Financial Economics, 2004, v73(2,Aug), 271-288.