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‘No‐load’ dividend reinvestment plans
Author(s) -
Steinbart Paul John,
Swanson Zane
Publication year - 1998
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(99)80149-9
Subject(s) - prospectus , shareholder , dividend , business , stock (firearms) , accounting , finance , monetary economics , financial system , economics , corporate governance , mechanical engineering , engineering
This article examines firms' motivations for offering investors the opportunity to purchase initial shares of stock directly from the company by joining the firm's dividend reinvestment plan (DRP). The results of both a telephone survey of Investor Relations Departments and analysis of plan prospectuses indicate that firms offer such no‐load DRPs with the objective of broadening their shareholder base. Moreover, additional analysis shows that firms which implement no‐load DRPs subsequently experience a significant decrease in the number of shares held per shareholder. Thus, no‐load DRPs do appear to be successful in broadening a firm's shareholder base.