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Jan 4, 2022 · The ability to substitute dividends for liquidity gives corporate managers more flexibility in improving market valuation and the ability of a firm to raise funds. This is even more important in emerging markets like Vietnam, where most investors in stock markets are individual investors who lack firm information due to the lower quality of disclosure.
Firstly, we confirm that dividend is a substitute for stock liquidity, which is consistent with the findings reported in several previous studies (Banerjee et al., 2007; Michaely & Qian, 2017). Secondly, we postulate that the link between stock liquidity and dividend payout is not uniform across emerging economies.
Feb 1, 2017 · The traditional clientele transaction cost view predicts a negative relation between stock liquidity and dividend payouts. Miller and Modigliani (1961) advance the proposition that dividends are irrelevant—in a frictionless world, shareholders' wealth is determined solely by the firm's investment opportunities and is independent of payout policy.
- Fuxiu Jiang, Yunbiao Ma, Beibei Shi
- 2017
Sep 1, 2022 · The direct liquidity channel, which effectively allows the selling of shares to substitute for dividends as a result of a reduction in transaction costs, is an important driver of the decimalization effect on dividends. 1
Nov 9, 2017 · There are several alternative explanations for these results. Firms with lower ownership concentration have more minority shareholders, who may want dividends for liquidity reasons. In contrast, majority shareholders may be less dependent on dividends because they receive salary from the firm—a substitute for dividends as a liquidity source.
Sep 1, 2022 · In addition to the direct channel—the reduction in trading frictions allowing the selling of shares to substitute for dividends—the treatment effect of liquidity might also come through indirect channels: clientele, governance, and investment changes triggered by the tradability conversion lead to changes in dividend payouts.
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Furthermore, historic liquidity is an important determinant of dividend initiations and omissions. Finally, we show that sensitivity of firm value to aggregate liquidity declines after dividend initiations, suggesting that investors view stock market liquidity and dividends as substitutes.
