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The Shareholder Base and Payout Policy

Published online by Cambridge University Press:  31 May 2013

Andriy Bodnaruk and
Per Östberg
Andriy Bodnaruk
Affiliation:
Department of Finance, University of Notre Dame, 238 Mendoza College of Business, Notre Dame, IN 46556, abodnaru@nd.edu
Per Östberg
Affiliation:
Department of Banking and Finance, University of Zürich, Plattenstrasse 14, 8032, Zürich, Switzerland, per.oestberg@bf.uzh.ch
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Abstract

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We examine the relation between the shareholder base and payout policy. Consistent with the idea that the shareholder base is related to the cost of external financing, we find that firms with small shareholder bases have lower payout levels and maintain higher cash holdings. We show that undertaking an open market repurchase results in a significant reduction in the size of the shareholder base. Consequently, we find that firms with small shareholder bases are less likely to undertake a repurchase (reduce the shareholder base even further) and are more likely to pay special dividends.

Information

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 48 , Issue 3 , June 2013, pp. 729 - 760
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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