Elective stock and scrip dividends

Isabel Feito Ruiz, Luc Renneboog, C. Vansteenkiste

Research output: Contribution to journalArticleScientificpeer-review

7 Citations (Scopus)


We investigate firms' decisions to pay elective stock dividends, known in the UK as scrip dividends. Scrip dividends give investors the choice between receiving new shares or the equivalent value as a cash dividend. UK firms paying scrip dividends are more likely to be financially constrained, and scrip dividends are used more when access to external financing is costly. Our results are robust to using the 2008 financial crisis as an exogenous shock to credit supply. Cash preservation is the most important corporate incentive to use scrip dividends as they tend to be distributed in combination with dividend cuts and with major corporate investments such as debt-financed mergers and acquisitions. Analysis of US dividend reinvestment plans by which investors purchase new shares confirms firms' cash-preservation motives.
Original languageEnglish
Article number101660
JournalJournal of Corporate Finance
Publication statusPublished - Oct 2020


  • Cash retention
  • Crisis
  • DRIP
  • Dividend policy
  • Dividend reinvestment plans
  • Elective stock dividend
  • Financial constraints
  • Financial crisis
  • Mergers and acquisitions
  • Optional stock dividend
  • Payout policy
  • Scrip dividends
  • Stock dividends


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