Table 6. Dividend policy and demand for dividends: Predicting returns, 19622000. Univariate regressions of future excess returns of dividend payers over nonpayers on the propensity to initiate, the propensity to continue paying, and the propensity to list as a payer. The dependent variable in Panel A is the difference in real returns between dividend payers r_{D}_{ }and nonpayers r_{ND}. The dependent variable in Panel B is real return of dividend payers r_{D}. The dependent variable in Panel C is the real return of nonpayers r_{ND}. R_{t}_{+}_{k} denotes cumulative returns from t+1 through t+k. 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 dividend premium P^{DND} is the difference between the logs of the valueweighted average markettobook ratios of dividend payers and nonpayers. The propensity to initiate dividends PTP New expresses new payers as a percentage of surviving nonpayers from t1. The propensity to continue dividends PTP Old expresses continuing payers as a percentage of surviving payers from t1. The propensity to list as a payer PTP List expresses new Compustat lists who are payers as a percentage of new Compustat lists. In the PTP List specification, a year trend is included in the regression. The independent variables are standardized to have unit variance. We report OLS coefficients and biasadjusted (BA) coefficients. Bootstrap pvalues represent a twotailed test of the null hypothesis of no predictability.


PTP New_{t}

PTP Old_{t}

PTP List_{t} (detrended)


N

OLS

BA

[pval]

R^{2}

OLS

BA

[pval]

R^{2}

OLS

BA

[pval]

R^{2}


Panel A: Relative returns

r_{Dt}_{+1 }– r_{NDt}_{+1}

37

7.68

6.54

[0.15]

0.10

7.68

7.97

[0.06]

0.10

6.13

6.87

[0.16]

0.07

r_{Dt}_{+2} – r_{NDt}_{+2}

36

13.27

12.63

[0.01]

0.31

7.90

8.20

[0.07]

0.11

9.47

9.49

[0.03]

0.15

r_{Dt}_{+3} – r_{NDt}_{+3}

35

8.81

8.79

[0.06]

0.14

5.90

6.13

[0.17]

0.07

7.08

7.49

[0.09]

0.08

R_{Dt}_{+3} – R_{NDt}_{+3}

35

30.54

28.23

[0.06]

0.47

21.62

23.63

[0.13]

0.25

24.88

23.91

[0.10]

0.28


Panel B: Payer returns

r_{Dt}_{+1}

37

4.06

4.39

[0.29]

0.06

2.14

2.41

[0.46]

0.02

3.11

2.15

[0.36]

0.03

r_{Dt}_{+2}

36

0.95

1.67

[0.79]

0.00

0.70

0.54

[0.85]

0.00

3.00

2.51

[0.31]

0.03

r_{Dt}_{+3}

35

1.87

2.28

[0.60]

0.01

1.12

0.92

[0.73]

0.00

2.88

2.85

[0.34]

0.02

R_{Dt}_{+3}

35

8.08

10.71

[0.39]

0.10

0.16

0.23

[0.99]

0.00

8.19

4.83

[0.37]

0.09


Panel C: Nonpayer returns

r_{NDt}_{+1}

37

3.62

2.26

[0.64]

0.01

5.54

5.76

[0.38]

0.03

3.01

4.93

[0.62]

0.01

r_{NDt}_{+2}

36

12.32

11.02

[0.07]

0.13

8.60

8.73

[0.16]

0.07

6.47

6.83

[0.26]

0.03

r_{NDt}_{+3}

35

6.94

6.54

[0.31]

0.04

7.02

7.27

[0.28]

0.04

4.20

4.80

[0.47]

0.01

R_{NDt}_{+3}

35

22.46

17.45

[0.23]

0.18

21.47

24.81

[0.21]

0.17

16.70

19.88

[0.36]

0.09

Table 7. Dividend policy and the dividend premium: Other controls, 19622000. Regressions of the propensity to pay dividends on measures of the dividend premium, growth opportunities, tax policy, and a time trend.
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 VW markettobook ratios for dividend payers and nonpayers. These data are shown in Table 1. The VW markettobook ratio M/B is averaged across nonpayers in Panels A, payers in Panel B, and new lists in Panel C. The VW dividend yield D/P is from CRSP. Tax is the difference between the top personal income rate and the top capital gains rate. With the exception of year, 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)

(6)


Panel A: PTP New_{t}

VW

2.83

2.36

2.34

4.19

3.77

3.74


[5.39]

[4.26]

[7.04]

[6.53]

[7.25]

[4.40]

VW Nonpayer M/B_{t}_{1}

1.92

1.82

1.81





[2.43]

[3.48]

[2.23]




VW D/P_{t}_{1}




1.63

1.40

1.39





[3.05]

[2.94]

[2.10]

Tax_{t1}


1.19

1.12


0.89

0.83



[2.48]

[2.05]


[1.71]

[1.61]

Year_{t1}



0.01



0.01




[0.15]



[0.12]

N

38

38

38

38

38

38

R^{2}

0.70

0.75

0.75

0.70

0.73

0.73


Panel B: PTP Old_{t}

VW

0.79

0.54

0.43

0.83

0.52

0.39


[2.64]

[2.08]

[1.57]

[2.64]

[1.96]

[1.47]

VW Payer M/B_{t}_{1}

0.30

0.34

0.38





[1.05]

[1.45]

[1.52]




VW D/P_{t}_{1}




0.16

0.33

0.38





[0.82]

[1.35]

[1.58]

Tax_{t1}


0.57

0.33


0.65

0.40



[2.27]

[1.30]


[2.45]

[1.75]

Year_{t1}



0.03



0.03




[0.68]



[0.71]

N

38

38

38

38

38

38

R^{2}

0.29

0.38

0.39

0.27

0.38

0.38


Panel C: PTP List_{t}

VW

16.88

10.84

5.97

16.35

9.47

2.55


[7.75]

[5.88]

[3.56]

[5.67]

[5.09]

[2.80]

VW New List M/B_{t}_{1}

2.89

2.37

3.90





[0.76]

[1.42]

[3.36]




VW D/P_{t}_{1}




1.54

2.15

5.27





[0.47]

[1.26]

[4.50]

Tax_{t1}


13.62

0.53


14.39

0.74



[7.67]

[0.34]


[7.73]

[0.74]

Year_{t1}



1.61



1.80




[7.19]



[14.98]

N

38

38

38

38

38

38

R^{2}

0.53

0.83

0.95

0.52

0.83

0.96

