Sizing Up New Capital Dividend Reinvestment Plans

by Albert Fredman, John Nichols



A New York stock exchange study reported that inadequate capital investment, research and development outlays, government regulation, and the cyclical instability of economic activity are among the major causes of low growth. It also stresses the importance of improving the relationship between risks and rewards as a means of shoring up the environment for capital formation and economic growth. In the U.S., recently, corporations, especially those in capital-intensive industries, have turned increasingly to new capital dividend reinvestment plans (NCDRPs) for an assured reasonable-cost source of equity funds. This article assesses the contribution of NCDRPs to the raising of equity in an otherwise bleak capital market. The author briefly discusses a variety of plan options which have stimulated greater shareholder interest in dividend reinvestment. He also discusses the possibility of tax relief for NCDRP participants. The analysis is based on responses to several questionnaires which were sent to companies having NCDRPs.

California Management Review

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