Do dividends matter? Should investors care whether their firm pays a high. low or no dividend? In a recent paper, I and my two co-authors suggest that they do matter because they communicate important information to investors. See below for a recent five-minute video by the Financial Times which argues that dividends do matter.
My colleague and former PhD student Gareth Campbell has created a website about the British Railway Mania - click here . This episode has been described by the Economist as probably the greatest bubble in human history. Gareth's website provides background on the Mania and posits some explanations for the 'bubble'. In his explanation of why the bubble happened, Gareth places a lot of emphasis on investor myopia regarding future dividends and uncalled capital. His study of investors during the episode does not support the view that this episode was fuelled by naive and irrational investors.