Do dividend reinvestment plans contribute to industrial firm value and efficiency?

Authors

  • Andrew Saporoschenko College of Business Administration, University of Akron, Akron, OH 44325-4803, USA

DOI:

https://doi.org/10.1016/S1057-0810(99)00020-7

Abstract

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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Published

1998-12-30

How to Cite

Saporoschenko, A. (1998). Do dividend reinvestment plans contribute to industrial firm value and efficiency?. Financial Services Review, 7(4), 273–289. https://doi.org/10.1016/S1057-0810(99)00020-7

Issue

Vol. 7 No. 4 (1998): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1998 JAI Press Inc.

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