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Payout and Firm's Catering

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  • Maria Elisabete Duante Neves

Abstract

This paper is built upon the predictions of the catering theory of dividends and examines whether investor sentiments exert significant influence on corporate dividend policy.Accordingly, we propose a dividend model that incorporates a variable at the firm-level proxy for the catering effect.Estimation of the model using the GMM shows that firms in Eurozone countries cater to their investors’ sentiments, and the model provides evidence supporting the catering model.Additionally, we show an interaction effect between catering and firm characteristics, particularly liquid assets, investment opportunities, and levels of free cash flow.

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  • Maria Elisabete Duante Neves, 2017. "Payout and Firm's Catering," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 104-132.
    • Handle: RePEc:ers:ijebaa:v:v:y:2017:i:4:p:104-132
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    Keywords

    Payout; investors’ sentiment; Catering; firm characteristics.;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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