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

Greg Filbeck, Donald J. Mullineaux

Research output: Contribution to journalArticlepeer-review

16 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)403-415
Number of pages13
JournalFinancial Review
Volume28
Issue number3
DOIs
StatePublished - Aug 1993

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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