Do dividend reinvestment plans contribute to industrial firm value and efficiency?
DOI:
https://doi.org/10.1016/S1057-0810(99)00020-7Abstract
This paper examines four hypotheses to test whether industrial firms offering DRIPs are structured to operate efficiently, given that DRIPs are a cheap source of outside financing for a firm. The hypotheses are derived from the corporate finance literature and partially based on a review of the previous DRIP-related finance literature. Evidence is found that larger firms will be more likely to offer DRIPs, which supports a bookkeeping hypothesis. No difference in valuation is found between DRIP firms and the other industry-matched firms using a Tobin’s q proxy. Several cash flow measures are found not to be higher for DRIP firms. © 1999 Elsevier Science Inc. All rights reserved.
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