Explaining investor preference for cash dividends

Abstract The well-known tendency of investors to favor cash dividends emerges quite naturally in two new theories of choice behavior [the theory of self-control due to Thaler and Shefrin (1981), and the version of prospect theory set out by Kahneman and Tversky (1979)]. Although our treatment is novel when viewed from the perspective of standard financial theory, it provides explanations for a phenomenon that has long been described as perplexing.

[1]  M. Machina.  "Expected Utility" Analysis without the Independence Axiom , 1982 .

[2]  Guy Charest,et al.  Dividend information, stock returns and market efficiency-II , 1978 .

[3]  David E. Bell,et al.  Regret in Decision Making under Uncertainty , 1982, Oper. Res..

[4]  P. Asquith,et al.  The Impact of Initiating Dividend Payments on Shareholders' Wealth , 1983 .

[5]  Student,et al.  PSYCHOLOGY OF PREFERENCES , 1982, Pediatrics.

[6]  Fischer Black,et al.  The effects of dividend yield and dividend policy on common stock prices and returns , 1974 .

[7]  R. Sugden,et al.  Regret Theory: An alternative theory of rational choice under uncertainty Review of Economic Studies , 1982 .

[8]  A. Tversky,et al.  On the elicitation of preferences for alternative therapies. , 1982, The New England journal of medicine.

[9]  R. Litzenberger,et al.  The effect of personal taxes and dividends on capital asset prices , 1979 .

[10]  John B. Long,et al.  The market valuation of cash dividends: A case to consider , 1978 .

[11]  R. Litzenberger,et al.  The Effects of Dividends on Common Stock Prices Tax Effects or Information Effects , 1982 .

[12]  R. Thaler.  Toward a positive theory of consumer choice , 1980 .

[13]  R. Pettit.  Taxes, transactions costs and the clientele effect of dividends , 1977 .

[14]  R. Thaler,et al.  An Economic Theory of Self-Control , 1977, Journal of Political Economy.

[15]  George A. Akerlof,et al.  The Economic Consequences of Cognitive Dissonance , 1982 .

[16]  F. Modigliani,et al.  DIVIDEND POLICY, GROWTH, AND THE VALUATION OF SHARES , 1961 .

[17]  Nils H. Hakansson,et al.  To Pay or Not to Pay Dividend , 1982 .

[18]  D. Feenberg.  Does the Investment Interest Limitation Explain the Existence of Dividends? , 1980 .

[19]  Jerry R. Green,et al.  Why Do Companies Pay Dividends? , 1979 .

[20]  James A. Brickley.  Shareholder wealth, information signaling and the specially designated dividend: An empirical study☆ , 1983 .

[21]  G. William Schwert,et al.  Size and stock returns, and other empirical regularities , 1983 .

[22]  K. Arrow.  Risk Perception in Psychology and Economics , 1982 .

[23]  A. Tversky,et al.  The framing of decisions and the psychology of choice. , 1981, Science.

[24]  A. Tversky,et al.  Prospect theory: analysis of decision under risk , 1979 .

[25]  P. Slovic.  Psychological Study of Human Judgment: Implications for Investment Decision-Making , 1972 .

[26]  M. C. Jensen,et al.  Harvard Business School; SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit , 1976 .

[27]  R. Litzenberger,et al.  Dividends, Short Selling Restrictions, Tax-Induced Investor Clienteles and Market Equilibrium , 1980 .

[28]  Thomas Russell,et al.  The Relevance of Quasi Rationality in Competitive Markets: Reply , 1985 .

[29]  M. Hersh,et al.  Thaler, and Shefrin. , 1981 .

[30]  R. Sugden,et al.  A Rationale for Preference Reversal , 1983 .

[31]  K. A. Rainbow.  The information content of dividends , 1974 .

[32]  L. J. Savage,et al.  The Utility Analysis of Choices Involving Risk , 1948, Journal of Political Economy.

[33]  F. Black.  The Dividend Puzzle , 1976 .

[34]  Barr Rosenberg and Vinay Marathe.,et al.  Tests of Capital Asset Pricing Hypotheses , 1975 .

[35]  R. Thaler,et al.  An Economic Theory of Self-Control , 1977, Journal of Political Economy.

[36]  H. Markowitz.  The Utility of Wealth , 1952, Journal of Political Economy.

[37]  A. Tversky,et al.  Prospect Theory : An Analysis of Decision under Risk Author ( s ) : , 2007 .

[38]  Wilbur G. Lewellen,et al.  Market Segmentation: Evidence on the Individual Investor , 1976 .

[39]  Marc R. Reinganum.  The anomalous stock market behavior of small firms in January: Empirical tests for tax-loss selling effects , 1983 .

[40]  Sudipto Bhattacharya,et al.  Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy , 1979 .

[41]  Myron S. Scholes,et al.  Dividends and Taxes: Some Empirical Evidence , 1982, Journal of Political Economy.