Do investors value shareholder perks? Evidence from Japan

• Published in: Journal of banking & finance 2022-10, Vol.143, p.106575, Article 106575
• Main Authors: Huang, Wei, Rhee, S. Ghon, Suzuki, Katsushi, Yasutake, Taeko
• Format: Article
• Language: English
• Subjects: Ex-day returns and volume; Investor heterogeneity; Mental accounting; Shareholder perks; Trading behavior
• ISSN: 0378-4266; 1872-6372
• DOI: 10.1016/j.jbankfin.2022.106575

•Shareholder perks are valued by investors, causing prices to drop on ex-days.•Heterogeneity in the value perceived by shareholders induces active trading.•The ex-day price drop is larger than the estimated cost of shareholder perks.•Investors perceive more value for in-kind shareholder perks than for gift cards. By focusing on the price and trading volume movements around the ex-days of shareholder perks, we investigate whether and how investors value shareholder perks. Using comprehensive shareholder perks data from Japan, we demonstrate a significant price decline for stocks with shareholder perks around ex-days, as an evidence that shareholder perks are valuable for investors. We also show that heterogeneous preference for shareholder perks among investors leads to active trading around the ex-day. A price drop larger than the estimated cost of shareholder perks implies that gift giving is welfare increasing, providing a new insight into the long-standing debate on whether gift giving creates welfare gain or loss. This study also provides empirical findings that are consistent with behavioral model of mental accounting, which posits that receiving a gift-in-kind rather than cash or gift cards is utility increasing for consumers.