Table 8. Dividend policy and the dividend premium: Firm characteristics controls, 19632000. Twostage regressions of dividend policy on firm characteristics and the dividend premium. The first stage performs FamaMacBeth logit regressions of dividend policy on firm characteristics.
The second stage regresses the average annual prediction errors (actual policy minus predicted policy) from the logit regressions on the dividend premium.
, where .
We perform this analysis on three subsamples. The first two rows examine the propensity to initiate dividends PTP New and so restrict the sample to surviving nonpayers. The next two rows examine the propensity to continue paying dividends PTP Old and so restrict the sample to surviving payers. The last two rows examine the propensity to list as a payer PTP List and so restrict the sample to new lists. The firm characteristics are the NYSE percentile NYP, the markettobook ratio M/B, asset growth dA/A, and profitability E/A. The NYSE percentile is the percentage of firms listed on the NYSE that are equal to or smaller in terms of market capitalization (PRC*SHROUT). The markettobook ratio is the ratio of the market value of the firm to its book value. Market value is equal to market equity at calendar year end (Item 24 times Item 25) plus book debt (Item 6 minus book equity). Book equity is defined as stockholders’ equity (generally Item 216) minus preferred stock (generally Item 10) plus deferred taxes and investment tax credits (Item 35) and post retirement assets (Item 330). Asset growth is the change in assets (Item 6) over assets. Profitability is earnings before extraordinary items (Item 18) plus interest expense (Item 15) plus income statement deferred taxes (50) over assets. 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. Tstatistics in the second stage regression use standard errors that are robust to heteroskedasticity and serial correlation up to four lags.

NYP_{t}

M/B_{t}

dA/A_{t}

E/A_{t}


VW


b

[tstat]

c

[tstat]

d

[tstat]

e

[tstat]


g

[tstat]

PTP New

1.54

[10.65]

0.85

[6.62]

0.21

[1.13]

9.60

[10.00]


3.35

[6.66]

PTP New

0.90

[6.13]



0.23

[1.48]

6.47

[12.42]


3.76

[6.71]

PTP Old

4.57

[10.09]

0.33

[1.31]

1.50

[5.15]

15.06

[5.87]


0.34

[1.73]

PTP Old

4.61

[10.63]



1.37

[4.96]

14.20

[6.01]


0.32

[1.56]

PTP List

4.56

[40.95]

0.78

[15.86]

0.84

[6.44]

10.76

[11.67]


11.20

[5.51]

PTP List

3.88

[37.16]



1.19

[8.64]

7.80

[13.06]


12.78

[6.99]

