, new insights, and new questions: the Brazilian case.
After four decades, the main theoretical issues regarding DP have focused upon the optimal DP for a firm, the market response to the firms' dividend decisions, the dividend signaling hypothesis, the dividend clientele
effect, taxation issues associated with dividends versus capital gains, importance of agency costs, lifecycle theory of dividend, and determinants of DP.
Some direct evidence on the dividend clientele
Prediction 21 is based on the existence of static dividend clienteles
, so I start by reviewing dividend clientele
Theory suggests several possible reasons for these positive abnormal returns, these include: reduction of free cash flow or debt capacity, signaling of management's optimism, distribution of tax preferred income, and dividend clientele
Bali and Hite (1998, 155) do not rule out the existence of dividend clienteles
, but suggest that the "Elton and Gruber (1970) findings cannot be interpreted as incontrovertible evidence that such clienteles exist." Consistent with a dividend clientele
existing, Bajaj and Vijh (19 90) and Denis et al.
There is a geographically varying dividend clientele
effect consistent with the variations in risk aversion among different cultural groups.
Schlarbaum (1978), 'Some direct evidence on the dividend clientele
Thus, their study provides economic reasoning and empirical evidence for a specific type of "dividend clientele
" as originally suggested by Miller and Modigliani (1961).
Any dividend clientele
effect among institutional investors is weaker now than it was before the PI standard emerged in the early 1990s.