The Global Preference for Dividends in Declining Markets

Investors globally prefer dividend-paying stocks over nondividend-paying stocks more in declining than in advancing markets, even accounting for firm-level growth opportunities, size and risk effects. Dividend-paying stocks outperform nondividend-paying stocks, from 0.63% (China) to 3.79% (Canada) more per month in declining than in advancing markets. In declining markets, dividend-paying firms outperform by more than any underperformance in advancing markets. The results are robust across dividend taxation regimes, legal environments,emerging and developed markets, periods prior to and after the 2008 global financial crisis, the exclusion of the dividend declaration month and in respect to segmented or integrated international capital markets.