Direct Investing
The Role of Stock Purchase Plans
DOI:
https://doi.org/10.61190/fsr.v11i1.4721Keywords:
Dividend reinvestment plans, Stock purchase plans, Individual investors, Direct investingAbstract
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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