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

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  • Mohammad Sami Ali

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.

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  • Mohammad Sami Ali, 2020. "Evaluating the Effectiveness of the Bird-in-Hand-Dividends Policy in the Stability of Jordanian Listed Banks," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 96-110, July.
    • Handle: RePEc:jfr:ijfr11:v:11:y:2020:i:4:p:96-110
    DOI: 10.5430/ijfr.v11n4p96
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    References listed on IDEAS

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    1. repec:idn:journl:v:18:y:2016:i:4:p:1-18 is not listed on IDEAS
    2. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    3. repec:rej:journl:v:16:y:2013:i:47:p:91-110 is not listed on IDEAS
    4. repec:idn:journl:v:18:y:2016:i:4c:p:1-18 is not listed on IDEAS
    5. Muhammad Farhan Malik & Amir Rafique, 2013. "Commercial Banks Liquidity in Pakistan: Firm Specific and Macroeconomic Factors," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(48), pages 139-154, June.
    6. Imran, Kashif & Usman, Muhammad & Nishat, Muhammad, 2013. "Banks dividend policy: Evidence from Pakistan," Economic Modelling, Elsevier, vol. 32(C), pages 88-90.
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