Why Do Companies Pay Dividends?

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Why Do Companies Pay Dividends?

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dc.contributor.author Feldstein, Martin
dc.contributor.author Green, Jerry
dc.date.accessioned 2009-08-06T15:26:29Z
dc.date.issued 1983
dc.identifier.citation Feldstein, Martin, and Jerry Green. 1983. Why do companies pay dividends? American Economic Review 73, no. 1: 17-30. en
dc.identifier.issn 0002-8282 en
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:3204679
dc.description.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 conflicting 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. en
dc.description.sponsorship Economics en
dc.language.iso en_US en
dc.publisher American Economic Association en
dc.relation.isversionof http://www.jstor.org/stable/1803923 en
dash.license LAA
dc.title Why Do Companies Pay Dividends? en
dc.relation.journal American Economic Review en
dash.depositing.author Green, Jerry

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  • FAS Scholarly Articles [7219]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University

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