Table 3. The Citizens Utilities dividend premium and market reactions to dividend initiations, 19622000. The Citizens Utilities (CU) price ratio is the log of the ratio of the annual average cash dividend class share price to the annual average stock dividend class share price. The 1962 through 1972 data are from Long (1978) and the 1973 through 1989 data are from CRSP. A firm is defined as a new dividend payer at time t if it has positive dividends per share by the ex date (Item 26) at time t and zero dividends per share by the ex date at time t1. We take the first dividend declaration date (DCLRDT) from CRSP in the twelve month period prior to the fiscal year ending in t. We calculate the sum of the differences between the firm return (RET) and the CRSP valueweighted market return (VWRETD) for a threeday window [1, +1] around the declaration date. The announcement effect A scales this return by the standard deviation of the excess returns between 120 calendar days and five trading days before the declaration date. The test statistic from Campbell, Lo, and Mackinlay (1997, equation 4.4.24) is shown in braces and tests the null hypothesis of zero average price reaction in year t.
  Initiation Announcement Effect  Year 
P^{CU}

N

Excess Return

A

[tstat]

1962

0.96

1

5.40

1.75

[1.73]

1963

0.98

17

1.94

0.47

[1.92]

1964

1.00

21

1.70

0.41

[1.85]

1965

1.00

21

1.43

0.40

[1.81]

1966

1.00

10

0.84

0.23

[0.73]

1967

0.95

10

0.18

0.06

[0.19]

1968

0.97

7

2.20

0.54

[1.40]

1969

0.97

10

1.82

0.37

[1.16]

1970

1.00

8

5.46

0.85

[2.37]

1971

0.96

19

2.08

0.37

[1.60]

1972

0.93

39

2.17

0.51

[3.14]

1973

0.96

112

3.45

0.70

[7.33]

1974

0.99

94

5.92

0.87

[8.34]

1975

0.96

128

5.21

0.77

[8.59]

1976

0.93

128

4.97

1.05

[11.75]

1977

0.91

114

4.28

1.12

[11.82]

1978

0.90

68

4.02

0.79

[6.43]

1979

0.89

43

3.62

0.70

[4.53]

1980

0.87

35

3.50

0.58

[3.38]

1981

0.92

33

3.57

0.89

[5.08]

1982

0.93

22

3.93

0.62

[2.89]

1983

0.81

25

3.49

0.85

[4.24]

1984

0.89

47

2.13

0.42

[2.85]

1985

0.93

34

1.25

0.35

[2.04]

1986

1.00

31

3.17

0.51

[2.80]

1987

0.92

50

1.38

0.16

[1.15]

1988

0.86

65

2.11

0.48

[3.86]

1989

0.84

50

3.68

0.78

[5.50]

1990

.

46

5.85

0.74

[4.96]

1991

.

31

5.20

0.63

[3.50]

1992

.

46

2.53

0.50

[3.39]

1993

.

42

0.55

0.06

[0.41]

1994

.

51

0.94

0.21

[1.50]

1995

.

44

1.81

0.39

[2.58]

1996

.

18

6.24

0.86

[3.61]

1997

.

20

2.35

0.52

[2.33]

1998

.

19

0.93

0.20

[0.87]

1999

.

17

2.38

0.28

[1.15]

2000

.

10

4.78

0.81

[2.54]

Mean

0.94

41

2.99

0.57

[3.48]

SD

0.05

33

1.75

0.35

[2.87]

Table 4. Correlations among demand for dividend measures, 19622000. The dividend premium P^{DND} is the difference between the logs of the EW and VW markettobook ratios for dividend payers and nonpayers. The Citizens Utilities dividend premium P^{CU} is the log of the ratio of the annual average cash dividend class share price to the annual average stock dividend class share price. The initiation announcement effect A is the average standardized excess return in a threeday window [1, +1] around the first declaration dates by new dividend payers. Future relative returns r_{Dt}_{+1 }– r_{NDt}_{+1 }is the difference in real returns for valueweighted indexes of dividend payers and nonpayers in year t+1. Future relative returns R_{Dt}_{+3 }– R_{NDt}_{+3 }is the cumulative difference in future returns from year t+1 through t+3. Pvalues are in brackets.

Dividend premium ()



Future returns


VW

EW


A_{t}

r_{Dt}_{+1 }– r_{NDt}_{+1}

R_{Dt}_{+3 }– R_{NDt}_{+3}

VW

1.00













EW

0.95

1.00






[0.00]







0.60

0.63

1.00





[0.00]

[0.00]





A_{t}

0.25

0.18

0.20

1.00




[0.13]

[0.27]

[0.31]




r_{Dt}_{+1 }– r_{NDt}_{+1}

0.21

0.24

0.28

0.16

1.00



[0.20]

[0.15]

[0.14]

[0.35]



R_{Dt}_{+3 }– R_{NDt}_{+3}

0.54

0.47

0.28

0.19

0.63

1.00


[0.00]

[0.00]

[0.15]

[0.27]

[0.00]


Table 5. Dividend policy and demand for dividends: Basic relationships, 19622000. Regressions of the propensity to pay dividends on measures of the dividend premium.
A firm is defined as a new dividend payer at time t if it has positive dividends per share by the ex date (Item 26) at time t and zero dividends per share by the ex date at time t1. The propensity to initiate dividends PTP New expresses payers as a percentage of surviving nonpayers from t1. The propensity to continue paying dividends PTP Old expresses payers as a percentage of surviving payers from t1. The propensity to list as a payer PTP List expresses payers as a percentage of new lists at t. The dividend premium P^{DND} is the difference between the logs of the EW and VW markettobook ratios for dividend payers and nonpayers. These data are shown in Table 1. The announcement effects A are the average standardized excess returns in a threeday window [1, +1] around the declaration dates of new dividend payers. The Citizens Utilities dividend premium P^{CU} is the log of the ratio of the annual average cash dividend class share price to the annual average stock dividend class share price. The independent variables are standardized to have unit variance. Tstatistics use standard errors that are robust to heteroskedasticity and serial correlation up to four lags.

(1)

(2)

(3)

(4)

(5)


Panel A: PTP New_{t}

VW

3.90




3.80


[6.56]




[10.74]

EW


3.63






[5.10]







1.70


0.52




[2.21]


[0.82]

A_{t}_{1}




2.15

1.06





[2.51]

[1.52]

N

38

38

28

38

28

R^{2}

0.60

0.52

0.11

0.18

0.70


Panel B: PTP Old_{t}

VW

0.85




1.00


[2.83]




[2.59]

EW


0.93






[2.96]







0.44


0.25




[1.02]


[0.61]

A_{t}_{1}




0.03

0.24





[0.09]

[0.87]

N

38

38

28

38

28

R^{2}

0.26

0.30

0.06

0.00

0.25


Panel C: PTP List_{t}

VW

16.08




10.11


[6.29]




[2.12]

EW


18.15






[7.12]







14.74


8.16




[4.68]


[1.64]

A_{t}_{1}




2.98

0.28





[0.58]

[0.11]

N

38

38

28

38

28

R^{2}

0.51

0.65

0.47

0.02

0.63

