Agency costs and dividend payments: The case of bank holding companies

Greg Filbeck, Donald J. Mullineaux

Research output: Contribution to journalArticlepeer-review

11 Scopus citations


This paper examines the hypothesis that agency costs are a primary factor motivating dividend payments. Norohna et al. (1996) present evidence that the agency cost rationale is context specific and that dividends will not be driven by agency costs when other mechanisms exist for controlling agency problems. We argue that regulation of bank holding companies involves a context specific case where agency costs may be less relevant. Using an empirical methodology similar to Born and Rimbey's (1993), we find that the abnormal returns associated with dividend announcements by bank holding companies are not related to their external financing activities. The monitoring activities of the capital markets are not a rationale for dividend payments in the presence of bank regulation. Our results are robust to an alternative explanation involving the signaling role of new equity financings.

Original languageEnglish (US)
Pages (from-to)409-418
Number of pages10
JournalQuarterly Review of Economics and Finance
Issue number3
StatePublished - 1999

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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