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

Greg Filbeck and Donald J Mullineaux

The Financial Review, 1993, vol. 28, issue 3, 403-15

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 signaling theory of dividend behavior. These studies typically focus on "large" changes, however. We argue that BHCs allow for a stronger test of signaling 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 1973-87. Copyright 1993 by MIT Press.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:28:y:1993:i:3:p:403-15

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