Regulatory Monitoring and the Impact of Bank Holding Company Dividend Changes on Equity Returns

Filbeck, Greg; Mullineaux, Donald J.

doi:10.1111/j.1540-6288.1993.tb01355.x

Cited by 25 publications

(10 citation statements)

References 11 publications

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“…In addition to the basic areas affecting financial distress, dividend changes have also long been viewed as a signal of both current and expected future firm prospects. Dividends work as a signal of future growth opportunities and this is consistent with the findings of Abreu and Gulamhussen (2013), Bessler and Nohel (1996), and Filbeck and Mullineaux (1993).…”

Section: Introductionsupporting

confidence: 78%

Monitoring mechanisms and financial distress of public listed companies in Malaysia

Kazemian

Shauri

Sanusi³

et al. 2017

Journal of International Studies

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Abstract. This study examines the relationships between financial distress and financial ratio (liquidity, leverage, profitability, firm's performance, and dividend) among public listed companies, using the Altman Z-Score to determine the financial distress levels among public listed companies in Malaysia. Five-year data has been collected (2010 to 2014) from the annual financial statements and from Data Stream of public listed companies in Malaysia. The findings indicate significant relationships between liquidity, leverage, profitability, firm's performance, and dividend with the financial distress levels among the companies in question. This study also examines the interaction effects of financial ratios and the year after implementation of the Malaysian Code on Soheil Kazemian, Noor Shauri, Zuraidah Sanusi, Amrizah Kamaluddin, Shuhaida Shuhdan Monitoring mechanisms and financial distress of public listed companies in Malaysia 93Corporate Governance (MCCG) in 2012 on financial distress levels. The results suggest that only liquidity and firm's performance have stronger effects on financial distress levels in two years after MCCG implementation. This indicates that after the implementation of the Code, liquidity and firms' performance ratios had strong and significant effect on financial distress levels. Overall, this study could help investors, creditors as well as external regulators in monitoring companies from being classified as financially distressed companies.

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Section: Introductionsupporting

confidence: 78%

Monitoring mechanisms and financial distress of public listed companies in Malaysia

Kazemian

Shauri

Sanusi³

et al. 2017

Journal of International Studies

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“…A managerial discretion to establish the payout policy can exacerbate the agency problems between managers and shareholders; such conflict is notably more severe in banks because of their highly levered capital structure (John et al 2010). Moreover, according to Filbeck and Mullineaux (1993) and Collins et al, (1994), dividends are usually employed as a signalling mechanism by banks. For example, banks can convey useful information to investors about the bank growth opportunities through dividend payouts (Abreu and Gulamhussen 2013).…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Board busyness and new insights into alternative bank dividends models

Trinh

Elnahass

Salama

2020

Rev Quant Finan Acc

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This study examines the possible opposing effects of the board function of busyness (i.e. the presence of busy independent non-executive directors serving on multiple boards) on bank dividend payout patterns between two alternative payouts models (i.e. conventional and Islamic). Using an international sample for listed banks during the periods of 2006-2018, we show that the busyness of boards of directors can explain differential dividend payouts behaviour between two banking systems. For conventional banking dividend model, a busy board has a significantly positive impact on the bank's dividend payout level. However, during the financial crisis of 2007/2009, the positive impact of board busyness on dividends payouts is tempered for these banks. In contrast, Islamic banks operating under a more constrained dividend model, report significantly lower levels of payouts and lower likelihood when they have busy directors on board. We find insignificant evidence for the effect of the financial crisis in Islamic banks. These results highlight a potential challenge for the unique agency conflicts arising from the complex payout model of Islamic banks (in terms of profit distribution principles, motives, mechanics and techniques, and flexibility of payouts), which is subject to the demand for greater monitoring and additional rulings when compared to the conventional.

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“…For signaling hypothesis, Filbeck and Mullineaux (1993) examine 177 publicly traded U.S. bank holding companies over the period 1973-1987 and found that unexpected dividend announcements have a direct impact on bank equity valuations. Boldin and Leggett (1995) examined 207 publicly traded U.S. bank holding companies and found empirical evidence that dividend payments increase external ratings of banks.…”

Section: Banking Dividends Literature and Hypothesismentioning

confidence: 99%

Regulatory hypothesis and bank dividend payouts: Empirical evidence from Italian banking sector

et al. 2015

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This study examines the regulatory hypothesis for bank dividend payouts using a panel dataset of 229 Italian banks over the period [2005][2006][2007][2008][2009][2010][2011][2012]. Regulatory hypothesis suggests that undercapitalized banks face more regulatory pressure for increasing capital levels by paying lower amount of dividends. Empirical results support the regulatory hypothesis by finding that the Italian banks having lower equity to total assets ratios or lower regulatory capital ratios retain more profits and pay lower amount of dividends. Results also suggest that dividend payer banks try to maintain dividends at previous level by not skipping or reducing dividends. Results further support that Fama and French (2001)'s three characteristics of dividend payers are also applicable to banks. That is, big-in-size, more profitable and low growth Italian banks pay higher amount of dividends. Findings of this study have important implications for recent regulatory proposals that suggest a direct regulation of dividends. A direct regulation of dividends, on one J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. hand, and regulatory pressure on dividend payout decisions through capital requirements, on the other hand, may have unintended consequences for dividends as signaling and agency cost reducing tools. JEL Classifications: G2; G35 B. N. Ashraf et al. 1550009-2 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. Regulatory hypothesis and bank dividend payouts 1550009-3 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. B. N. Ashraf et al. 1550009-4 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. Regulatory hypothesis and bank dividend payouts 1550009-5 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. B. N. Ashraf et al. 1550009-6 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. Regulatory hypothesis and bank dividend payouts 1550009-7 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. 1550009-10 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only. B. N. Ashraf et al. 1550009-12 J. Finan. Eng. 2015.02. Downloaded from www.worldscientific.com by MONASH UNIVERSITY on 08/25/15. For personal use only.

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Regulatory Monitoring and the Impact of Bank Holding Company Dividend Changes on Equity Returns

Cited by 25 publications

References 11 publications

Monitoring mechanisms and financial distress of public listed companies in Malaysia

Monitoring mechanisms and financial distress of public listed companies in Malaysia

Board busyness and new insights into alternative bank dividends models

Regulatory hypothesis and bank dividend payouts: Empirical evidence from Italian banking sector

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