Local creative culture and dividend policy

Abstract

This paper examines the role of local risk-taking propensity on dividend demand by using local creative culture as a measure of local risk-taking. We find that firms located in areas with a strong creative culture are less likely to pay and initiate dividends and exhibit lower levels of dividend yield. The empirical findings also remain robust after addressing endogeneity and a series of robustness checks. Furthermore, our paper highlights the local component of corporate dividend policies and offers additional evidence supporting dividend catering theory. Our results underscore the importance of cultural determinants of investors’ risk-taking for the financial industry participants.