“…Banks appear to be intrinsically more opaque than non-bank institutions (Morgan 2002;Iannotta 2006;Blau et al 2017). They can signal their value to outsiders through their dividend policies (Boldin and Leggett 1995;Bessler et al 2006;Cornett et al 2011), and both positive and negative dividend changes affect the value of their stocks more strongly than that of non-bank institutions (Keen 1983;Filbeck and Mullineaux 1993;Bessler and Nohel 1996). In contrast, share repurchases appear less important as a market signal (Hirtle 2014), possibly because they do not constitute a permanent commitment and, unlike dividends, are paid out of temporary rather than sustainable cash flows (Jagannathan et al 2000) or are less costly to investors than are dividends (Grullon and Michaely 2002).…”
Bank dividends are unusually persistent. In a crisis, they exacerbate systemic risk and raise concerns for regulators. Bank managers, however, may keep dividends elevated to mitigate agency conflicts with shareholders. One theory holds that persistent dividends may substitute for monitoring by dispersed shareholders. A second theory proposes that they attract institutional shareholders who monitor banks, mitigate agency conflicts, and seek to protect their investments' value. After controlling for regulatory enforcement actions, we test both theories using 7722 bank-quarter observations spanning the 2007-2009 financial crisis. Our results suggest that dividend persistence increases with managerial agency conflicts but decreases in the presence of concentrated institutional shareholders, consistent with the second theory. In addition, contrary to the first theory, dispersed shareholders have no influence on bank dividend policies. Instead, these dispersed shareholders are associated with more frequent stock repurchase programs.
“…Banks appear to be intrinsically more opaque than non-bank institutions (Morgan 2002;Iannotta 2006;Blau et al 2017). They can signal their value to outsiders through their dividend policies (Boldin and Leggett 1995;Bessler et al 2006;Cornett et al 2011), and both positive and negative dividend changes affect the value of their stocks more strongly than that of non-bank institutions (Keen 1983;Filbeck and Mullineaux 1993;Bessler and Nohel 1996). In contrast, share repurchases appear less important as a market signal (Hirtle 2014), possibly because they do not constitute a permanent commitment and, unlike dividends, are paid out of temporary rather than sustainable cash flows (Jagannathan et al 2000) or are less costly to investors than are dividends (Grullon and Michaely 2002).…”
Bank dividends are unusually persistent. In a crisis, they exacerbate systemic risk and raise concerns for regulators. Bank managers, however, may keep dividends elevated to mitigate agency conflicts with shareholders. One theory holds that persistent dividends may substitute for monitoring by dispersed shareholders. A second theory proposes that they attract institutional shareholders who monitor banks, mitigate agency conflicts, and seek to protect their investments' value. After controlling for regulatory enforcement actions, we test both theories using 7722 bank-quarter observations spanning the 2007-2009 financial crisis. Our results suggest that dividend persistence increases with managerial agency conflicts but decreases in the presence of concentrated institutional shareholders, consistent with the second theory. In addition, contrary to the first theory, dispersed shareholders have no influence on bank dividend policies. Instead, these dispersed shareholders are associated with more frequent stock repurchase programs.
This article analyzes, from a finance perspective, various approaches to commercializing ideas and innovation. It includes an analysis of private and corporate venture capital and other corporate venturing activities such as strategic alliances and mergers and acquisitions (M&A) as well as recent financial innovation. The article is organized as follows. First, it analyzes the relationship between venture capital and innovation, and then focuses on the exit and growth opportunities of venture backed firms. Next it explores corporate venturing activities, examining strategic alliances and M&As as alternatives for acquiring new ideas and innovation. It outlines more recent approaches for funding and commercializing innovation before concluding.
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