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The Impact of Dividend Reinvestment Plans on Firm Payout Choices—Evidence from Real Estate Investment Trusts

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  • Shaun A. Bond
  • Yu‐Jou Pai
  • Peng Wang
  • Suyan Zheng

Abstract

This study investigates whether firm dividend payout choices are influenced by the presence of a Dividend Reinvestment Plan (DRIP). Given that DRIPs help retain capital, we show that dividend‐paying firms with a DRIP will tend to pay a high dividend and maintain a stable payout policy. Using a multinomial logistic model, we show that in comparison to REITs without DRIPs, REITs with DRIPs have a higher payout ratio and are less likely to: (1) pay regular dividends with extra dividends and share repurchases, (2) distribute extra dividends, repurchase shares, yet omit regular dividends and (3) omit all payouts. In addition, we find that REITs with a capital‐retaining DRIP invest more aggressively and such increased investment activities are undertaken without raising the reliance on external financing.

Suggested Citation

  • Shaun A. Bond & Yu‐Jou Pai & Peng Wang & Suyan Zheng, 2019. "The Impact of Dividend Reinvestment Plans on Firm Payout Choices—Evidence from Real Estate Investment Trusts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 47(1), pages 178-213, March.
    • Handle: RePEc:bla:reesec:v:47:y:2019:i:1:p:178-213
    DOI: 10.1111/1540-6229.12248
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    Cited by:

    1. David H. Downs & Bing Zhu, 2022. "Property market liquidity and REIT liquidity," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(6), pages 1462-1491, November.
    2. Shamsabadi, Hussein Abedi & Tebourbi, Imen & Nourani, Mohammad & Min, Byung S., 2021. "Corporate Governance and Dividend Reinvestment Plans: Insights from Imputation Tax in Australia," Finance Research Letters, Elsevier, vol. 41(C).

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