Do managers cater to investors’ demand for income?

Bektemir Ysmailov

2026

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DOI 10.1108/rcf-01-2025-0002

Data confidence 70 medium

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Abstract

Investors have a higher demand for and place a higher valuation on income-generating assets such as high-dividend stocks when interest rates are low (Daniel et al., 2021). We examine whether managers cater to such investor demand for income by paying dividends when interest rates are low, and by not paying when interest rates are high to boost their firms' share prices. There is evidence of this when the controls for the known determinants of dividend policy are omitted. However, once the controls (most notably, for risk) are incorporated, the relationship disappears.