Why Do Companies Pay Dividends?

Martin S. Feldstein · Jerry Green

132 citations0/0 files storedNational Bureau of Economic Research

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Finance and Governance Financial Markets and Investment Strategies Corporate Taxation and Avoidance

Abstract

This paper presents a simple model of market equilibrium to explain why firms that maximize the value of their shares pay dividends even though the funds could instead be retained and subsequently distributed to shareholders in a way that would allow them to be taxed more favorably as capital gains.The two principal ingredients of our explanation are:(1) the cionflicting preferences of shareholders in different tax brackets and (2) the shareholders' desire for portfolio diversification, we show that companies will pay a positive fraction of earnings in dividends.We also provide some comparative static analysis of dividend behavior with respect to tax parameters and to the conditions determining the riskiness of the securities.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 132 citations exist upstream.

References

1958The Cost of Capital, Corporation Finance and the Theory of Investment 1979Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy 1978Dividends and taxes 1979Wealth Maximization and the Cost of Capital 1981The incidence and allocation effects of a tax on corporate distributions 1980Public Policy and the Corporation 1970Corporate Taxation and Dividend Behaviour

Cited by

2018Stock return and financial performance as moderation variable in influence of good corporate governance towards corporate value 2002Revisiting the dividend puzzle 1994MACROECONOMIC FACTORS, THE APT AND THE UK STOCKMARKET 2020Political corruption and corporate payouts 2007Institutional and individual investor preferences for dividends and share repurchases 2001Taxes, Regulations, and Asset Prices 2004Dividend Policy, Agency Costs, and Earned Equity

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.