Dividend payments are a classic example of mental accounting. In theory, it shouldn’t matter if a company pays a dividend to investors and these investors use that dividend for their consumption or other purposes, or if a company pays no dividend and investors sell parts of their holdings to finance the same consumption. In theory, it shouldn’t matter, but in practice it does. This is why investors treat companies that pay a dividend differently than those that do not.
It's not just shareholders but governments too - look at the left-leaning regeimes which had taxation higher for "unearned" dividend income than wages, and the free-market-leaning regiemes taxing dividends less than wages. I'm not even going to mention capital gains taxes.
Yeah, mental accounting.
It's not just shareholders but governments too - look at the left-leaning regeimes which had taxation higher for "unearned" dividend income than wages, and the free-market-leaning regiemes taxing dividends less than wages. I'm not even going to mention capital gains taxes.