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‘No‐load’ dividend reinvestment plans

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  • Paul John Steinbart
  • Zane Swanson

Abstract

This article examines firms' motivations for offering investors the opportunity to purchase initial shares of stock directly from the company by joining the firm's dividend reinvestment plan (DRP). The results of both a telephone survey of Investor Relations Departments and analysis of plan prospectuses indicate that firms offer such no‐load DRPs with the objective of broadening their shareholder base. Moreover, additional analysis shows that firms which implement no‐load DRPs subsequently experience a significant decrease in the number of shares held per shareholder. Thus, no‐load DRPs do appear to be successful in broadening a firm's shareholder base.

Suggested Citation

  • Paul John Steinbart & Zane Swanson, 1998. "‘No‐load’ dividend reinvestment plans," Review of Financial Economics, John Wiley & Sons, vol. 7(2), pages 121-141.
    • Handle: RePEc:wly:revfec:v:7:y:1998:i:2:p:121-141
    DOI: 10.1016/S1058-3300(99)80149-9
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    References listed on IDEAS

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    1. Scholes, Myron S. & Wolfson, Mark A., 1989. "Decentralized investment banking : The case of discount dividend-reinvestment and stock-purchase plans," Journal of Financial Economics, Elsevier, vol. 24(1), pages 7-35, September.
    2. Roden, Foster & Stripling, Tom, 1996. "Dividend reinvestment plans as efficient methods of raising equity financing," Review of Financial Economics, Elsevier, vol. 5(1), pages 91-100.
    3. Smith, Clifford Jr., 1977. "Alternative methods for raising capital : Rights versus underwritten offerings," Journal of Financial Economics, Elsevier, vol. 5(3), pages 273-307, December.
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