What Can explain catering of dividend? Environment information and investor sentiment

摘要

This paper offers a new evidence of the catering theory of dividend explained by three proxies proposed by Baker and Wurgler in the emerging market. Even although the result Investor preference for dividend is explained by different factors related to market situation and investor psychology is different from markets, it can be the evidence supporting the catering theory of dividend, not only in well-developed markets, but also in emerging markets such as our country. The purpose of this paper is to examine whether investor sentiment and market situation can influence the investor demand for dividend in 6 countries from MENA region. The sample includes all listed stocks in the Stock Exchange of 6 countries from MENA region during the years 2004-2013, excluding the firms from financial industries and firms with incomplete information. The catering theory explained by three proxies is measured by dividend premium, modified dividend premium and the previous market to book. Investor sentiment explains by four proxies, and the market situation explains by some factors. The findings yield qualitatively consistent with the previous research. After controlling the effect of investor sentiment and market situation, the result shows that the investor demands for dividend affected by behavior and market reaction. Furthermore, investors prefer dividends more in a bear market (underperforming) rather than bull markets (underperforming). Investors demand more dividends when their sentiment is negative. The findings of the study suggest that fair induction of corporate his feeling and the development of the financial market can help investor to take an efficacy decision to demand or not dividend from firms.