Footnote:
In: Journal of Financial and Quantitative Analysis, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2005 erstellt
Description:
We provide evidence of a link between firm dividend policy and stock market liquidity. In the cross-section, owners of less (more) liquid common stock are more (less) likely to receive cash dividends. Predictions of the proportion of dividend payers based on 1963-1977 cross-sectional estimates account for most of the declining propensity of firms to pay dividends documented by Fama and French (2001). Furthermore, historic liquidity is an important determinant of dividend initiations and omissions. Finally, we show that sensitivity of firm value to aggregate liquidity declines after dividend initiations, suggesting that investors view stock market liquidity and dividends as substitutes