Dividend sentiment, catering incentives, and return predictability

Alok Kumar; Zicheng Lei; Chendi Zhang

doi:10.1016/j.jcorpfin.2021.102128

Dividend sentiment, catering incentives, and return predictability

Alok Kumar, Zicheng Lei, Chendi Zhang^*

^*Corresponding author for this work

Accounting & Financial Management

Research output: Contribution to journal › Article › peer-review

12 Citations (Scopus)

Abstract

Using Internet search volume of dividend-related keywords to measure investor preference for dividends that varies over time and across states, we show that dividend sentiment affects corporate policies and asset prices. Investors search more for dividends when economic conditions are poor, with the peak volume reached during the recent COVID-19 pandemic. Firms initiate or increase dividends when dividend sentiment is stronger, especially in regions with strong dividend sentiment. Shifts in dividend sentiment predict higher investor demand for dividends and higher returns for high dividend stocks. Further, mutual funds that pay high dividends receive more inflows when dividend sentiment is stronger.

Original language	English
Article number	102128
Journal	Journal of Corporate Finance
Volume	72
Early online date	14 Dec 2021
DOIs	https://doi.org/10.1016/j.jcorpfin.2021.102128
Publication status	E-pub ahead of print - 14 Dec 2021

Keywords

Dividend catering
Dividend sentiment
Internet search volume
Investor attention
Return predictability

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10.1016/j.jcorpfin.2021.102128

https://ore.exeter.ac.uk/repository/handle/10871/128209Licence: CC BY-NC-ND

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title = "Dividend sentiment, catering incentives, and return predictability",

abstract = "Using Internet search volume of dividend-related keywords to measure investor preference for dividends that varies over time and across states, we show that dividend sentiment affects corporate policies and asset prices. Investors search more for dividends when economic conditions are poor, with the peak volume reached during the recent COVID-19 pandemic. Firms initiate or increase dividends when dividend sentiment is stronger, especially in regions with strong dividend sentiment. Shifts in dividend sentiment predict higher investor demand for dividends and higher returns for high dividend stocks. Further, mutual funds that pay high dividends receive more inflows when dividend sentiment is stronger.",

keywords = "Dividend catering, Dividend sentiment, Internet search volume, Investor attention, Return predictability",

author = "Alok Kumar and Zicheng Lei and Chendi Zhang",

note = "Funding Information: We thank Malcolm Baker, Carina Cuculiza, and Jeff Wurgler; conference participants at the China International Conference in Finance 2017, EFMA 2017, FMA European Meeting 2017, and Swiss Society for Financial Market Research (SGF) Conference 2019, and seminar participants at the Universities of Central South, Exeter, Miami, Surrey, and Warwick for helpful comments and suggestions. We thank Yao Chen for sharing a part of investor trading data. All remaining errors and omissions are our own. Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",

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doi = "10.1016/j.jcorpfin.2021.102128",

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N2 - Using Internet search volume of dividend-related keywords to measure investor preference for dividends that varies over time and across states, we show that dividend sentiment affects corporate policies and asset prices. Investors search more for dividends when economic conditions are poor, with the peak volume reached during the recent COVID-19 pandemic. Firms initiate or increase dividends when dividend sentiment is stronger, especially in regions with strong dividend sentiment. Shifts in dividend sentiment predict higher investor demand for dividends and higher returns for high dividend stocks. Further, mutual funds that pay high dividends receive more inflows when dividend sentiment is stronger.

AB - Using Internet search volume of dividend-related keywords to measure investor preference for dividends that varies over time and across states, we show that dividend sentiment affects corporate policies and asset prices. Investors search more for dividends when economic conditions are poor, with the peak volume reached during the recent COVID-19 pandemic. Firms initiate or increase dividends when dividend sentiment is stronger, especially in regions with strong dividend sentiment. Shifts in dividend sentiment predict higher investor demand for dividends and higher returns for high dividend stocks. Further, mutual funds that pay high dividends receive more inflows when dividend sentiment is stronger.

KW - Dividend catering

KW - Dividend sentiment

KW - Internet search volume

KW - Investor attention

KW - Return predictability

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Dividend sentiment, catering incentives, and return predictability

Abstract

Keywords

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