Premium
Regulatory Monitoring and the Impact of Bank Holding Company Dividend Changes on Equity Returns
Author(s) -
Filbeck Greg,
Mullineaux Donald J.
Publication year - 1993
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1993.tb01355.x
Subject(s) - dividend , equity (law) , monetary economics , dividend policy , financial economics , economics , dividend yield , business , dividend payout ratio , econometrics , financial system , finance , political science , law
This paper examines the impact of announcements of dividend changes by bank holding companies (BHCs) on equity returns. Many empirical studies of dividend behavior reveal positive market responses to dividend increases, which have been interpreted as confirmation of the signalling theory of dividend behavior. These studies typically focus on “large” changes, however. We argue that BHCs allow for a stronger test of signalling theory because regulatory monitors, in effect, “certify” dividend signals. Consequently, even “small” dividend increases should result in positive abnormal equity returns. Using the event study methodology, our results generally confirm this hypothesis for a sample covering the period 1973–1987.