Dividend policy, systematic liquidity risk, and the cost of equity capital

• Published in: Review of quantitative finance and accounting Vol. 60; no. 3; pp. 839 - 876
• Main Authors: Mazouz, Khelifa, Wu, Yuliang, Ebrahim, Rabab, Sharma, Abhijit
• Format: Journal Article
• Language: English
• Published: New York Springer US 01.04.2023; Springer Nature B.V
• Subjects: Accounting/Auditing; Asymmetry; Cash flow; Companies; Corporate Finance; Dividend policy; Econometrics; Economic conditions; Economic crisis; Economics and Finance; Equity capital; Finance; Hypotheses; Investments; Liquidity; Operations Research/Decision Theory; Original Research; Payments; Risk exposure; Risk reduction; Stock exchanges; Stockholders; Value; Dividend policy; Firm value; G32; G35; G12; Systematic liquidity risk; Cost of equity capital

This paper examines a new channel through which dividend policy can affect firm value. We find that firms that pay dividends exhibit lower systematic liquidity risk than those that do not. We also report a significant negative relationship between dividend payment and systematic liquidity risk. The...