Dividend clientele, new insights, and new questions: the Brazilian case

Abstract

This paper analyzes the dividend clientele effect and the signaling hypothesis in the Brazilian stock market between 1996 and 2000. During this period, the dividend tax was zero and the capital gains tax varied between zero and 10%. Brazilian firms face two information regimes, which allow us to test the signaling hypothesis. From a sample of 394 observations studied, 39% show a first ex-dividend day stock price higher than the price on the last cum-dividend day. The market price is higher for unanticipated dividends but, even with pre-announced dividends, stock prices are higher than the expected level, which is inconsistent with the clientele hypothesis. We also find evidence of a positive abnormal volume around the unanticipated dividend date, which is consistent with the signaling hypothesis, but no abnormal trading volume around pre-announced dividend dates. Our findings are inconsistent with the clientele hypothesis but provide support for the signaling hypothesis.

Payout policy in Brazil: Dividends versus interest on equity

“…We follow Procianoy and Verdi (2009) and study shareholder votes and board of director decisions separately. Shareholder meetings are announced at least eight days in advance of the meeting, whereas board meetings and their decisions should not be anticipated by the market.…”

Dividendos e efeito clientela: evidências no mercado brasileiro

“…Utilizando o modelo de Elton e Gruber (1970), Procianoy e Verdi (2009) analisaram o Efeito Clientela no mercado brasileiro de ações entre 1996 e 2000 e concluíram que, embora não se possam descartar ajustes advindos do Efeito Clientela nos preços a partir da data ex-dividendo, os resultados do estudo foram contrários às previsões da teoria.…”

Nonfinancial Firms as Large Shareholder Use Dividend Policy for Management Monitoring in Brazil

“…In this context, Brazilian market has a set of specific characteritics that makes it an important economy that requires attention: the greatest economy in Latin America, high firm ownership concentration, low protection of minority shareholders, minimum mandatory dividend policy of 25% of net income in Brazil (Law no. 11.638/2007), high private benefits of control that favor large controlling shareholders (Brandão & Crisóstomo, 2015;Dyck & Zingales, 2004;Holanda & Coelho, 2014;Procianoy & Verdi, 2009). Besides, some macroeconomic events also make dividend policy an interesting topic to be analyzed in Brazil: the drop in inflation, from 1994, and the process of poststabilization, the growth of stock market capitalization, and the importance given to the adoption by firms of good corporate governance practices (Moreiras, Tambosi Filho, & Garcia, 2012;Procianoy & Verdi, 2009 (Martins & Famá, 2012).…”