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The More, the Merrier: An International Analysis of the Frequency of Dividend Payment

Authors

  • Stephen P. Ferris,

    1. The authors are respectively from the Department of Finance, University of Missouri; Milgard School of Business, University of Washington Tacoma; and the Department of Finance, University of Nebraska-Lincoln. They would like to acknowledge insightful comments on previous versions of this manuscript by the editor (Martin Walker), and an anonymous referee.
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  • Gregory Noronha,

    1. The authors are respectively from the Department of Finance, University of Missouri; Milgard School of Business, University of Washington Tacoma; and the Department of Finance, University of Nebraska-Lincoln. They would like to acknowledge insightful comments on previous versions of this manuscript by the editor (Martin Walker), and an anonymous referee.
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  • Emre Unlu

    Corresponding author
    1. The authors are respectively from the Department of Finance, University of Missouri; Milgard School of Business, University of Washington Tacoma; and the Department of Finance, University of Nebraska-Lincoln. They would like to acknowledge insightful comments on previous versions of this manuscript by the editor (Martin Walker), and an anonymous referee.
    Search for more papers by this author

* Address for correspondence: Stephen P. Ferris, Trulaste College of Business, 404 Cornell Hall, University of Missouri, Columbia, M065211, USA.
e-mail: ferriss@missouri.edu

Abstract

Abstract:  The joint contributions of prospect theory and mental accounting imply that investors receive a higher utility when a given level of dividends is paid more frequently, suggesting that dividends should be paid as often as possible. We document a strong positive relationship between payment frequency and firm value, confirmed with an event study of dividend payment frequency changes. Upon examining the frequency with which dividends are paid around the world, we discover that considerable variation exists, and that dividends are not paid as often as behavioral aspects suggest they should. From our multivariate analysis, we determine that non-behavioral factors such as the legal regime as well as the level and standard deviation of operating income exert significant influences on the payment frequency of dividends, suggesting that a tradeoff exists between behavioral and non-behavioral factors. The relationship between payment frequency and firm value remains robust in the presence of these non-behavioral factors.

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