Dividend policy and private shareholders : a New Zealand survey
Degree GrantorUniversity of Canterbury
Degree NameMaster of Commerce
The main focus of this thesis was to learn about the individual investor and their view of dividends. It set out to investigate whether private investors regard dividends as important (to themselves personally or as a signal of the company's performance) and also how dividends impact upon a company's value. The subject group is one which has been neglected by previous finance research as very little is known about their demographics and investing practices. Five major areas of dividend research were examined. These were: do investors believe that dividends affect the value of the share, how they prefer to obtain their income from shares, the reasons for dividend increases and decreases, whether dividend changes (increases and decreases) occur for different reasons and whether an age clientele effect exists. Most of these problems have been investigated previously by other researchers, but few have used individual investors to analyse these areas. A survey of 280 private investors tested these questions and concluded that private investors believe that dividends do affect the value of a share, dividends were perceived to be a safer form of income (but capital gains is preferred), that dividend increases and decreases occur because of different reasons (mostly related to profitability or liquidity) and that an age clientele does exist. Most significantly, this analysis revealed that investors behave in a way best described by Lintner's view of dividend policy, as they: prefer higher dividends to lower dividends, believe dividends are a safer form of income and believe that dividends affect the value of a share.