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Stock Market Liquidity and Firm Dividend Policy
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  1. Stock Market Liquidity and Firm Dividend Policy SumanBanerjee Vladimir A. Gatchev Paul A. Spindt Presenter 周立軒

  2. Agenda • Intuition • Sample & Variables • Empirical Result • Conclusion

  3. Intuition • In MM’s world, Cash Dividend and Liquidity are irrelevant. • If investors want cash, they can directly sell stock • “Homemade Dividend” • What if the market exist “Friction” ?

  4. Intuition • If Trading Friction exist, investors well demand “Compensation” for the risk. • Market is imperfect • Liquidity is one of the most effective factor

  5. Intuition • So, follow this logic, firms well take Liquidity into account for dividend paying. • Furthermore, the link between Liquidity and Dividend Policy is examined here.

  6. Sample & Variable

  7. Empirical Result

  8. Empirical Result

  9. Empirical Result

  10. Empirical Result

  11. Empirical Result

  12. Empirical Result

  13. Empirical Result

  14. Empirical Result

  15. Empirical Result

  16. Empirical Result

  17. Empirical Result: Robust Test • Repurchase • Do not affect the result here • Clienteles • Still the same result • ESO • Firms reserve more stock for conversion, are less likely to pay dividend.

  18. Empirical Result

  19. Conclusion • Market Liquidity has negative relation with Dividend Payout. • Firms will pay dividend for catering the liquidity preference of investors • In other words, decline dividend payer can improve Market Liquidity • Firms can decline the sensitivity of Liquidity risk by Paying Dividend.