Evaluating the Effectiveness of the Bird-in-Hand-Dividends Policy in the Stability of Jordanian Listed Banks

Mohammad Sami Ali

International Journal of Financial Research, 2020, vol. 11, issue 4, 96-110

Abstract: The present paper is empirically scrutinized the long and short-run causalities, which are running from the bird-in-hand dividends policy towards investors' preferences as proxied by banks¡¯ stability. Through analyzing a quarterly data set covering the period Q1/1996-Q4/2018; results from the ADF test proved that the series variables became stationary only after including the first difference. However, although the Johansen test showed long-run integrations among variables; findings from the single equation of the error correction model asserted that there are no long-run causalities running from dividends¡¯ policy towards investors¡¯ preferences as captured by the Z-Score index ¡°ZSI¡±, bankometer model or market capitalization. By contrast, results from the Wald¦Ö^2test proved that except for earnings per share and retained ratio; the solvency of banks is found to be significantly responding to the change in dividends payout ratio. However, since there are short-run correlations among dividends¡¯ stability, investors¡¯ preferences and banking stability, the study concluded that the ZSI is significantly related to investors¡¯ attitudes towards banks' decisions regarding dividends¡¯ payments.

Keywords: banks¡¯ stability; bankometer model; bird-in-hand dividends policy; dividends stability; investors' preferences (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:11:y:2020:i:4:p:96-110

DOI: 10.5430/ijfr.v11n4p96

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