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Lazy dividends
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AI
DOI：10.1016/j.jcorpfin.2025.102858.png)
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Abstract
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Dividends are clustered in increments of 5, such as 25, 50, and 75. Firms that gravitate towards these ‘prominent’ amounts have lower operating performance and lower annual five-factor alphas of 77 b.p. Consistent with agency frictions that lead to lazy decisions, clustering effects are stronger for entrenched firms, with more market power, and less shareholder activism. Dividend increases also cluster more than cuts, consistent with saliency bias. In a counterfactual exercise, we find no similar patterns in a sample of ADRs. Our results complement a number of recent studies showing the economic importance of simple decision heuristics.
Keywords:
dividend clustering
agency frictions
saliency bias
shareholder activism
heuristic decision-making
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