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The Impact of Dividend Reinvestment Plans on Firm Payout Choices—Evidence from Real Estate Investment Trusts
Author(s) -
Bond Shaun A.,
Pai YuJou,
Wang Peng,
Zheng Suyan
Publication year - 2018
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12248
Subject(s) - dividend payout ratio , dividend , dividend policy , real estate investment trust , monetary economics , economics , investment (military) , business , multinomial logistic regression , real estate , finance , financial economics , machine learning , politics , political science , computer science , law
This study investigates whether firm dividend payout choices are influenced by the presence of a Dividend Reinvestment Plan ( DRIP ). Given that DRIP s help retain capital, we show that dividend‐paying firms with a DRIP will tend to pay a high dividend and maintain a stable payout policy. Using a multinomial logistic model, we show that in comparison to REITs without DRIP s, REITs with DRIP s have a higher payout ratio and are less likely to: (1) pay regular dividends with extra dividends and share repurchases, (2) distribute extra dividends, repurchase shares, yet omit regular dividends and (3) omit all payouts. In addition, we find that REITs with a capital‐retaining DRIP invest more aggressively and such increased investment activities are undertaken without raising the reliance on external financing.