Why Individual Investors Want Dividends

The question of why individual investors want dividends is investigated by submitting a questionnaire to a Dutch investor panel. The respondents indicate that they want dividends partly because the cost of cashing in dividends is lower than the cost of selling shares. Their answers provide strong confirmation for the signaling theories of Bhattacharya (1979) and Miller and Rock (1985). They are inconsistent with the uncertainty resolution theory of Gordon (1961, 1962) and the agency theories of Jensen (1986) and Easterbrook (1984). The behavioral finance theory of Shefrin and Statman (1984) is not confirmed for cash dividends but is confirmed for stock dividends. Finally, our results indicate that individual investors do not tend to consume a large part of their dividends. This raises some doubt as to whether a reduction or elimination of dividend taxes will stimulate the economy.Dividends, individual investors, survey

Do spin-offs really create value? The European case

We study wealth effects for a sample of 156 spin-offs from 15 different European countries that were announced between January 1987 and September 2000. The cumulative average abnormal return over the three-day event window is 2.62%. This number increases to 2.66% for the subsequently completed spin-offs. The cumulative average abnormal return is 3.57% for completed spin-offs by companies that increase their industrial focus and only 0.76% for non-focus increasing companies. The difference between these two sub-samples is significantly different from zero. These results are in line with previous studies for the United States. The long-run returns in excess of matching firms are mostly insignificant for parents, subsidiaries and pro-forma combined firms. This result suggests that, unlike U.S. spin-offs, European spin-offs are not associated with long-run superior performance

Do Happy People Make Optimistic Investors?

Do happy people predict future risk and return differently from unhappy people, or do individuals rely only on economic facts? We survey investors on their subjective sentiment-creating factors, return and risk expectations, and investment plans. We find that non-economic factors systematically affect return and risk expectations, where the return effect is more profound. Investment plans are also affected by non-economic factors. Sports results and general feelings significantly affect predictions. Sufferers from seasonal affective disorder have lower return expectations in the autumn than in other seasons, supporting the Winter Blues hypothesis

Why Do Financially Unconstrained Firms Borrow to Repurchase Shares?

The authors are grateful to Seth Armitage, Vidhan Goyal, Yulia Merkoulova, Patrick Verwijmeren, and Betty Wu for helpful comments and suggestions. Special thanks go to two anonymous referees and to Alan Lowe and Nathan Joseph, the editors, for their very helpful comments.Preprin

The effects of bank regulation stringency on seasoned equity offering announcements

Peer reviewedPostprin

The dividend and share repurchase policies of Canadian firms: empirical evidence based on an alternative research design

We empirically investigate dividend and share repurchase policies of Canadian firms. Our analysis contains two features that are uncommon in finance, while they are encountered in other fields of science. First, we use standard, simultaneous and nested logit models. The non-standard logit models are often used in recreational economics and marketing. By examining different model specifications, we test alternative descriptions of the behavior of decision-makers. Second, we use questionnaire data on firm characteristics. Collecting data by questionnaires is hardly ever done in finance, while it is the mainstream approach in sociology and organization. We have sent a questionnaire to the 500 largest non-financial Canadian companies listed on the Toronto Stock Exchange, of which 191 usable responses were returned. Our results are consistent with a structure in which the company first decides whether it wants to pay out cash to its shareholders or not. In the second stage the firm decides on the form of the payout: dividends, share repurchases or both. Payout is determined by free cash flow. The choice for dividends and repurchases depends on behavioral and tax preferences. Furthermore, the payout is less likely to be dividends if the company has executive stock option plans. Finally, we find evidence for the Brennan and Thakor (1990) model. According to this model the existence of asymmetric information amongst outsiders is associated with a preference for dividend payments over share repurchases

Parity transitions in the superconducting ground state of hybrid InSb-Al Coulomb islands

The number of electrons in small metallic or semiconducting islands is quantized. When tunnelling is enabled via opaque barriers this number can change by an integer. In superconductors the addition is in units of two electron charges (2e), reflecting that the Cooper pair condensate must have an even parity. This ground state (GS) is foundational for all superconducting qubit devices. Here, we study a hybrid superconducting-semiconducting island and find three typical GS evolutions in a parallel magnetic field: a robust 2e-periodic even-parity GS, a transition to a 2e-periodic odd-parity GS,and a transition from a 2e- to a 1e-periodic GS. The 2e-periodic odd-parity GS persistent in gate-voltage occurs when a spin-resolved subgap state crosses zero energy. For our 1e-periodic GSs we explicitly show the origin being a single zero-energy state gapped from the continuum, i.e. compatible with an Andreev bound states stabilized at zero energy or the presence of Majorana zero modes

The risk perceptions of individual investors

Risk perceptions of individual investors are studied by asking experimental questions to 2,226 members of a consumer panel. Their responses are analyzed in order to find which risk measures they implicitly use. We find that most investors implicitly use more than one risk measure. For those investors who systematically perceive risk according to the same risk measure, semi-variance of returns is most popular. Semi-variance is similar to variance, but only negative deviations fro the mean or another benchmark are taken into account. Stock investors implicitly choose for semi-variance as a risk measure, while bond investors favor probability of loss. Investors state that they consider the original investment to be the most important benchmark, followed by the risk-free rate of return, and the market return. However, their choices in the experimental questionnaire study reveal that the market return is the most important benchmark