Stock Market Liquidity and Firm Dividend Policy

Corporate governance and its effect on the liquidity of a stock: evidence from the MENA region

“…The results for the above analysis are reported in Table 4. Our results are consistent with Banerjee et al (2007) and Dong et al (2003) who show that liquidity and dividends are substitute for each other in emerging markets. We report significantly negative coefficient estimate of dividend payout ratio for both equations.…”

“…Consistent with Banerjee et al (2007), we argue that frictions in the MENA region stock markets lead to high demand for dividends in less liquid stocks, thereby resulting in negative relationship between the two. The results of our analysis show that higher analyst following, lower ownership concentration, and having Big-Four auditors as external auditors lead to higher liquidity.…”

“…La Porta et al (2000) formalise the above findings in a theory known as the substitute model of dividends. In contrast to Igan et al (2010), Banerjee et al (2007) suggest that if there are frictions in the market (as is the case most of the times), there may not exist a positive relationship between dividends and liquidity. High dividends signal to market that there is less cash available for management to expropriate.…”

Stock Liquidity and Investment Opportunities: Evidence from Index Additions

“…This article complements an emerging body of empirical literature that explicitly examines links between corporate finance and the market microstructure of a firm's stock. These studies include evidence that investment banking fees for seasoned equity offers are lower for firms with greater stock liquidity (Butler, Grullon, and Weston, 2005), that firms with lower stock liquidity are more likely to pay dividends (Banerjee, Gatchev, and Spindt, 2005), and that stock liquidity interacts with debt policy (Lipson andMortal, 2004, andLesmond, O'Connor, andSenbet, 2003). We contribute to this literature by providing insight into how frictions in a firm's trading environment can constrain its investment opportunities.…”

Blockholder leverage and payout policy: Evidence from French holding companies

“…()’s finding that dividends increase for firms capable of financing equity from retained earnings rather than raised capital when including their suggested lifecycle variable retained earnings/total equity. Dividend payouts do not depend on our measure of stock market liquidity (we report results using Banerjee, Gatchev, and Spindt ()’s first liquidity measure of annual stock turnover), or other control variables included in the regression. Company leverage is not significant when we control for post‐crisis leverage (regressions (4) to (6)).…”