Direct Investing

The Role of Stock Purchase Plans

Authors

  • H. Kent Baker American University, Kogod School of Business, Department of Finance and Real Estate
  • Walayet A. Khan University of Evansville, School of Business Administration
  • Tarun K. Mukherjee University of New Orleans, Department of Economics and Finonce

DOI:

https://doi.org/10.61190/fsr.v11i1.4721

Keywords:

Dividend reinvestment plans, Stock purchase plans, Individual investors, Direct investing

Abstract

Direct stock purchase plans (DSPPs) represent an innovative financial service that provides individual investors with a cost effective and easy way to become stockholders. We survey managers of 267 U.S. companies with DSPPs to determine their rea.sons for establishing such plans, the factors contributing to their success in attracting investors, and their vieirs about the future of DSPPs. The results show that companies offer DSPPs for both economic and relationship-related reasons. The major factors contributing to a plan's success are low cost combined with ease and convenience but promotional restrictions limit the ability of firms to attract investors. In the future, companies are likely to adopt DSPPs if they want to add small investors to the shareholder base.

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Published

2002-03-31

How to Cite

Baker, H. K., Khan, W. A., & Mukherjee, T. K. (2002). Direct Investing: The Role of Stock Purchase Plans. Financial Services Review, 11(1), 47–63. https://doi.org/10.61190/fsr.v11i1.4721

Issue

Vol. 11 No. 1 (2002): FSR Spring 2002

Section

New Original Submission

License

Copyright (c) 2002 Academy of Financial Services

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