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Year 2014, Volume: 3 Issue: 3, 371 - 397, 01.09.2014

Abstract

References

  •  Acharya, V., I. Gujral, N. Kulkarni, and H. Shin (2011), ‘Dividends and Bank Capital in the Financial Crisis of 2007-2009’, National Bureau of Economic Research Working Paper No. 16896.
  •  Allen, F., A. Bernardo, and I. Welch (2000, ‘A Theory of Dividends Based on Tax Clienteles’, The Journal of Finance, Vol. 55 (December), pp. 2499 – 2536.
  •  Bagwell, L., and J. Shoven (1988), ‘Share Repurchases and Acquisitions: An Analysis of which Firms Participate’ in Corporate Takeovers: Causes and Consequences, Edited by A.G. Auerbach, (Chicago, IL: University of Chicago Press).
  •  Baker, M., and Wurgler, J. (2004), ‘A Catering Theory of Dividends’, The Journal of Finance, Vol. 59 (June), pp. 1125-1165.
  •  Bayazitova, D, and A. Shivdasani (2009), ‘Assessing TARP’, Working Paper (University of North Carolina).
  •  Bens, D., V. Nagar, D. Skinner, and M. Wong (2003), ‘The Real Investment Implications of ESO Exercises’, Journal of Accounting Research, Vol. 40, pp. 359-393.
  •  Berger, A., R. DeYoung, M. Flannery, D. Lee and O. Oztekin (2008), ‘How Do Large Banking Organizations Manage Capital Ratios?’ The Federal Reserve Bank of Kansas City Economic Research Department, RWP 08-01.
  •  Bhattacharya, S. (1979), ‘Imperfect Information, Dividend Policy, and ‘the Bird in the Hand’ Fallacy’, Bell Journal of Economics, Vol. 10, pp. 259-270.
  •  Black, F. (1976), ‘The Dividend Puzzle’, Journal of Portfolio Management, Vol. 2, pp. 5 Brav, A., J. Graham, C. Harvey, and R. Michaely (2005), ‘Payout Policy in the 21st Century’, Journal of Financial Economics, Vol. 77, pp. 483-527.
  • DeAngelo, H., L. DeAngelo, and D. Skinner (1992). ‘Dividends and Losses’, The Journal of Finance, Vol. 47, pp. 1837-1863.
  • Dittmar, A.K., (2000), ‘Why do Firms Repurchase Stocks?’ The Journal of Business, Vol. 73, pp. 331–356.
  • Easterbrook, F. (1984), ‘Two Agency-Cost Explanations of Dividends’, American
  • Economic Review, Vol. 84, pp. 650-659. Fenn, G. and N. Liang (2001), ‘Corporate Payout Policy and Managerial Stock
  • Incentives’, Journal of Financial Economics, Vol. 60, pp. 45-72.  Grullon, G. and R. Michaely (2002), ‘Dividends, Share Repurchases, and the Substitution Hypothesis’, Journal of Finance, Vol. 57, pp. 1649-1684.
  •  Guay, W. and J. Harford (2000), ‘The Cash-Flow Permanence and Information Content of Dividend Increases Versus Repurchases’, Journal of Financial Economics, Vol. 57, pp. 385-415.
  •  Healy, P. and K. G. Palepu (1988), ‘Earnings Information Conveyed by Dividend Initiations and Omissions’, Journal of Financial Economics, Vol. 21, pp. 149-176.
  •  Hirtle, B. (1998), ‘Bank Holding Company Capital Ratios and Shareholder Payouts’, Current Issues in Economics and Finance (Federal Reserve Bank Of New York), Vol. 4 (September), pp. 1-6.
  •  Hirtle , B. (2004), ‘Stock Repurchases and Bank Holding Company Performance’, Journal of Financial Intermediation, Vol. 13, pp. 28-57.
  •  Hovakimian, A., T. Opler, and S. Titman (2001, ‘The Debt-Equity Choice.’, Journal of Financial and Quantitative Analysis, Vol. 36 (March), pp. 1-24.
  •  Hribar, S.,N. Jenkins, and W. Johnson (2006), ‘Stock Repurchases as an Earnings Management Device’, Journal of Accounting and Economics, Vol. 41, pp. 3-27.
  •  Ikenberry, D., J. Lakonishok, and T. Vermaelen (1995), ‘Market Underreaction to Open Market Share Repurchases’, Journal of Financial Economics, Vol. 39, pp. 18120
  •  Jensen, M. C. (1986), ‘Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers’, American Economic Review, Vol. 76, pp. 323-329.
  •  Kahle, K.M. (2002, ‘When a Buyback isn’t a Buyback: Open Market Repurchases and Employee Options’, Journal Of Financial Economics, Vol. 63, pp. 235-261.
  • Lakonishok, J., A. Shleifer, and R. Vishny, R.W. (1994), ‘Contrarian Investment, Extrapolation, and Risk.’, Journal of Finance, Vol. 49, pp. 1541-1578.
  • Li, W. and E. Lie (2006), ‘Dividend Changes and Catering Incentives’, Journal of
  • Financial Economics, Vol. 80, pp. 293-308. Miller, M. And K. Rock (1985), ‘Dividend Policy Under Asymmetric Information’, Journal of Finance, Vol. 40 (September), pp. 1031-1051.
  • Ng, J., F. Vasvari, and R. Wittenberg-Moerman, R. (2010), ‘The Participants in the TARP Capital Purchase Program: Failing or Healthy Banks?’ Chicago Booth Research Paper No. 20-10.
  •  Nissam, D. and A. Ziv (2001), ‘Dividend Changes and Future Profitability’, Journal of Finance, Vol. 56, pp. 2111-2133.
  •  Ofer, A. And A. Thakor (1987), ‘A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends’, Journal of Finance, Vol. 42 (June), pp. 365-394.
  •  Skinner, D. (2008), ‘The Evolving Relation Between Earnings, Dividends, and Stock Repurchases.’, Journal of Financial Economics, Vol. 87, pp. 582-609
  •  Vafeas, N. (1997), ‘Determinants of The Choice Between Alternative Share Repurchase Methods’, Journal of Accounting, Auditing and Finance, Vol. 12, pp. 1011
  •  Vermaelen, T. (1981), ‘Common Stock Repurchases and Market Signaling: An Empirical Study’, Journal of Financial Economics, Vol. 9, pp. 139-183.
  •  Vermaelen, T. (1984), ‘Repurchase Tender Offers, Signaling and Managerial Incentives’, Journal of Financial and Quantitative Analysis, Vol. 19, pp. 163-181.
  •  Vermaelen, T. (2005), ‘Share Repurchases, Foundations and Trends’, in Finance, Vol. 1, pp. 171-268 (Hanover, MA, Now Publishers).
  •  Veronesi P. and L. Zingales (2010), ‘Paulson’s Gift’, Journal of Financial Economics, Vol. 97, pp. 339-368.
  • Exhibit 1 – Sample Firms 1 Accredited Home Lenders 59 JP Morgan Chase & Co. 2 Alabama National Bancorporation 60 Keycorp 3 Amcore Financial Inc. 61 Lehman Brothers Holding 4 Associated Banc-Corp 62 M&T Bank Corp 5 Astoria Financial Corp. 63 MAF Bancorp Inc. 6 Bancorpsouth Inc. 64 Marshall & Ilsley Corp. 7 Bank of America Corp 65 MB Financial Inc. 8 Bank of Hawaii Corp. 66 Mercantile Bankshares Corp. 9 Bank of New York Mellon 67 Merrill Lynch & Co. Inc. 10 Bankatlantic Bancorp 68 Morgan Stanley 11 Bankunited Financial Corp. 69 National City Corp. 12 BB&T Corp. 70 National Pen Bancshare 13 Bear Stearns Companies 71 NBT Bancorp Inc. 14 BFC Financial Corp. 72 New York Community Bancorp 15 BOK Financial 73 Newalliance Bancshares 16 Boston Private Financial Holdings 74 Northern Trust Corp. 17 Capitol Federal Financial 75 Northwest Bancorp Inc. 18 Cathay General Bancorp 76 Old National Bancorp 19 Central Pacific Financial Corp. 77 Pacific Capital Bancorp. 20 Chittenden Corp. 78 Pacwest Bancorp 21 Citigroup Inc. 79 Park National Corp. 22 Citizens Republic Bancorporation 80 PNC Financial Services Group 23 City National Corp 81 Popular Inc. 24 Colonial Bancgroup 82 Provident Bankshares Co. 25 Comerica Inc. 83 Provident Financial Services Inc. 26 Commerce Bancorp Inc. 84 Regions Financial Corp. 27 Compass Bancshares Inc. 85 Signature Bank (NY)\ 28 Corus Bankshares Inc. 86 SKY Financial Group Inc. 29 Countrywide Financial Corp. 87 South Financial Group Inc. 30 Cullen/Frost Bankers Inc. 88 Sovereign Bancorp Inc. 31 CVB Financial Corp. 89 Sterling Financial Corp. 32 Delta Financial Corp. 90 Suntrust Banks Inc. 33 Downey Financial Corp. 91 Susquehanna Bancshares 34 East West Bancorp Inc. 92 SVB Financial Group 35 Fannie Mae 93 Synovus Financial Corp. 36 First Citizens Bancshares 94 TCF Financial Corp. 37 First Commonwealth Financial Corp. 95 Trustmark Corp. 38 First Horizon National 96 U.S. Bancorp 39 First Midwest Bancorp. Inc. 97 UCBH Holdings Inc. 40 First Niagara Financial 98 UMB Financial corp. 41 Firstfed Financial Corp. 99 Umpqua Holdings Corp. 42 Firstmerit Corp 100 UnionBanCal Corp. 43 Fifth Third Bancorp 101 United Bankshares Inc. 44 Flagstar Bancorp Inc. 102 United Community Banks 45 FNB Corp. 103 Valley National Bancorp 46 Franklin Bank Corp. 104 Wachovia Corp. 47 Fremont General Corp. 105 Washington Federal Inc. 48 Fulton Financial Corp. 106 Washington Mutual Inc. 49 Goldman Sachs Group Inc. 107 Webster Financial Corp. 50 Greater Bay Bancorp 108 Wells Fargo & Co. 51 Hancock Holding Co. 109 Westamerica Bancorporation 52 Hudson City Bancorp Inc. 110 Whitney Holding Corp. 53 Huntington Bancshares 111 Wilmington Trust Corp 54 Indymac Bancorp Inc. 112 Wintrust Financial Corp. 55 International Bancshares Corp. 113 Zions Bancorporation 56 Investors Bancorp Inc. 57 Investors Financial Services 58 Irwin Financial Corp. Large firms indicated in bold print. Table 1 - Descriptive statistics of sample for selection year 2006
  • All Firms Large Firms Other Firm N N N Assets Mean 113 120,631 28 444,643 *** 85 13,898 Median 12,891 191,074 *** 9,828 MVE Mean 113 16,461 28 59,112 *** 85 2,412 Medium 2,151 28,532 *** 1,709 Tier 1 Ratio Mean 101 933 20 544 *** 81 276 Median 770 515 *** 900 TCE Ratio Mean 113 340 28 974 *** 85 790 Median 311 830 *** 480 Return on TCE Mean 113 0.196 28 0.248 85 0.179 Median 0.196 0.268 *** 0.173 Market to Book Mean 113 992 28 075 85 965 Median 912 004 855 Assets is the book value of assets measured as of the end of 2006 (millions); MVE is the market value of common stock outstanding, measured as of the end of the fiscal year 2006 (millions); Tier 1 Ratio is the tier 1 capital ratio calculated according to FDIC and OTC thrift rules and reported during the fourth quarter of fiscal 2006 (percent); TCE Ratio is calculated as tangible common equity divided by tangible assets as of the end of fiscal 2006 (percent); Return on TCE is fiscal 2006 net income divided by average common tangible equity; Market to Book is the ratio of the market value of common equity divided by the book value of common equity. Large Firms are defined as having a fiscal 2006 market value of equity of at least the 85th percentile of the NYSE while Other Firms have a fiscal 2006 market value of equity of less than then 85th percentile of the NYSE. *** and ** indicate a 0.01 and 0.05 difference respectively between the large firms and other firms using a two sample mean test and Wilcoxon sum rank tests of the medians.
  • Table 2: Descriptive Statistics of firm payouts 2004 - 2007
  • Panel A - All Firms N $ DIV $ RP % RP RP / TCE DIV / NI PO / NI % Change CSOS 2004 - Mean 112 37 31 0.0172 0.0351 0.3952 0.6700 0.0643 - Median 0 8 0.0091 0.0273 0.4150 0.5859 0.0119 2005 - Mean 112 49 51 0.0220 0.0649 0.4284 0519 0.0181 - Median 3 9 0.0114 0.0328 0.4108 0.6481 0.0033 2006 - Mean 113 47 61 0.0242 0.0732 0.3960 0.7171 0.0450 - Median 0 0 0.0140 0.0387 0.4315 0.7080 0.0064 2007 - Mean 102 57 68 0.0360 0.0941 0.4477 0092 0.0125 - Median 5 2 0.0315 0.0848 0.4597 0.9004 -0.0090
  • Panel B - Large Firms N $ DIV $ RP % RP RP / TCE DIV / NI PO / NI % Change CSOS 2004 - Mean 31 1,22 *** 1,09 *** 0.0303 *** 0.1022 ** 0.4104 0.8234 * 0.0853 - Median 50 *** 58 *** 0.0242 *** 0.0794 ** 0.4271 0.7786 *** 0.0156 2005 - Mean 30 1,40 *** 2,001 *** 0.0405 *** 0.1208 *** 0.4136 0.9324 -0.0017 ** - Median 600 *** 55 *** 0.0330 *** 0.1092 *** 0.4636 0.9412 *** -0.0100 ** 2006 - Mean 28 1,75 *** 2,67 *** 0.0453 *** 0.1457 *** 0.4094 0.9648 *** 0.0260 - Median 88 *** 92 *** 0.0389 *** 0.1238 *** 0.4562 0.9374 *** -0.0077 ** 2007 - Mean 29 1,88 *** 2,203 *** 0.0453 * 0.1245 0.4487 0.9453 0.0187 - Median 90 *** 1,03 *** 0.0414 ** 0.1343 ** 0.4663 0.8994 -0.0028
  • Panel C – Other Firms N $ DIV $ RP % RP RP / TCE DIV / NI PO / NI CSOS 2004 - Mean 80 5 7 0.0121 0.0095 0.3894 0.6105 0.0561 - Median 8 6 0.0043 0.0065 0.4135 0.4879 0.0118 2005 - Mean 82 9 3 0.0153 0.0444 0.4338 0957 0.0253 - Median 2 1 0.0065 0.0193 0.4083 0.5355 0.0056 2006 - Mean 85 1 5 0.0171 0.0493 0.3916 0.6356 0.0513 - Median 5 4 0.0066 0.0189 0.4218 0.5791 0.0096 2007 - Mean 73 0 3 0.0324 0.0824 0.4473 0347 0.0100 - Median 4 0 0.0300 0.0746 0.4567 0.9013 -0.0106
  • $ DIV is common dividends paid during the year (millions); $RP is the total value of share repurchases and shares accepted in lieu of employee stock exercise prices and other tax withholdings for employee stock compensation redemptions (millions); % RP is the number of shares repurchased during the year to common shares outstanding at the end of the prior year; RP / TCE is the dollar amount of shares repurchased to tangible common equity measured at the end of the prior fiscal year; DIV / NI is common dividends t divided by income available to common shareholders at t-1; PO / NI is total payouts to common shareholders (dividends plus share repurchases) divided by net income available to common shareholders at t-1 ; is net income divided by average assets. % Change CSOS is the percentage reduction in common shares outstanding between t-1 and t. A firm is considered a large firm if its market value of equity at the end of the prior year is at least in the 85 percentile of the NYSE. . ***, **, and * indicate a 0.01, 0.05, and 0.10 difference respectively between the large firms and other firms using a two sample means test and Wilcoxon sum rank tests of the medians.

Capital Distributions in the Banking Industry

Year 2014, Volume: 3 Issue: 3, 371 - 397, 01.09.2014

Abstract

As the 2008 banking disaster loomed banks increased their dividends and stock repurchase distributions to common shareholders dramatically. This unique time period provides a natural experimental setting to examine financial institutions' capital management strategies during periods of macroeconomic change. As the crisis loomed, we find that U.S. banks did not conserve cash but returned capital to investors at the same pace that they earned capital from operations. We also find that U.S. firms that accepted funds from the Capital Purchase Program (CPP) relative to nonCPP firms, returned a higher proportion of their available capital to shareholders in the periods leading up to the financial crisis.

References

  •  Acharya, V., I. Gujral, N. Kulkarni, and H. Shin (2011), ‘Dividends and Bank Capital in the Financial Crisis of 2007-2009’, National Bureau of Economic Research Working Paper No. 16896.
  •  Allen, F., A. Bernardo, and I. Welch (2000, ‘A Theory of Dividends Based on Tax Clienteles’, The Journal of Finance, Vol. 55 (December), pp. 2499 – 2536.
  •  Bagwell, L., and J. Shoven (1988), ‘Share Repurchases and Acquisitions: An Analysis of which Firms Participate’ in Corporate Takeovers: Causes and Consequences, Edited by A.G. Auerbach, (Chicago, IL: University of Chicago Press).
  •  Baker, M., and Wurgler, J. (2004), ‘A Catering Theory of Dividends’, The Journal of Finance, Vol. 59 (June), pp. 1125-1165.
  •  Bayazitova, D, and A. Shivdasani (2009), ‘Assessing TARP’, Working Paper (University of North Carolina).
  •  Bens, D., V. Nagar, D. Skinner, and M. Wong (2003), ‘The Real Investment Implications of ESO Exercises’, Journal of Accounting Research, Vol. 40, pp. 359-393.
  •  Berger, A., R. DeYoung, M. Flannery, D. Lee and O. Oztekin (2008), ‘How Do Large Banking Organizations Manage Capital Ratios?’ The Federal Reserve Bank of Kansas City Economic Research Department, RWP 08-01.
  •  Bhattacharya, S. (1979), ‘Imperfect Information, Dividend Policy, and ‘the Bird in the Hand’ Fallacy’, Bell Journal of Economics, Vol. 10, pp. 259-270.
  •  Black, F. (1976), ‘The Dividend Puzzle’, Journal of Portfolio Management, Vol. 2, pp. 5 Brav, A., J. Graham, C. Harvey, and R. Michaely (2005), ‘Payout Policy in the 21st Century’, Journal of Financial Economics, Vol. 77, pp. 483-527.
  • DeAngelo, H., L. DeAngelo, and D. Skinner (1992). ‘Dividends and Losses’, The Journal of Finance, Vol. 47, pp. 1837-1863.
  • Dittmar, A.K., (2000), ‘Why do Firms Repurchase Stocks?’ The Journal of Business, Vol. 73, pp. 331–356.
  • Easterbrook, F. (1984), ‘Two Agency-Cost Explanations of Dividends’, American
  • Economic Review, Vol. 84, pp. 650-659. Fenn, G. and N. Liang (2001), ‘Corporate Payout Policy and Managerial Stock
  • Incentives’, Journal of Financial Economics, Vol. 60, pp. 45-72.  Grullon, G. and R. Michaely (2002), ‘Dividends, Share Repurchases, and the Substitution Hypothesis’, Journal of Finance, Vol. 57, pp. 1649-1684.
  •  Guay, W. and J. Harford (2000), ‘The Cash-Flow Permanence and Information Content of Dividend Increases Versus Repurchases’, Journal of Financial Economics, Vol. 57, pp. 385-415.
  •  Healy, P. and K. G. Palepu (1988), ‘Earnings Information Conveyed by Dividend Initiations and Omissions’, Journal of Financial Economics, Vol. 21, pp. 149-176.
  •  Hirtle, B. (1998), ‘Bank Holding Company Capital Ratios and Shareholder Payouts’, Current Issues in Economics and Finance (Federal Reserve Bank Of New York), Vol. 4 (September), pp. 1-6.
  •  Hirtle , B. (2004), ‘Stock Repurchases and Bank Holding Company Performance’, Journal of Financial Intermediation, Vol. 13, pp. 28-57.
  •  Hovakimian, A., T. Opler, and S. Titman (2001, ‘The Debt-Equity Choice.’, Journal of Financial and Quantitative Analysis, Vol. 36 (March), pp. 1-24.
  •  Hribar, S.,N. Jenkins, and W. Johnson (2006), ‘Stock Repurchases as an Earnings Management Device’, Journal of Accounting and Economics, Vol. 41, pp. 3-27.
  •  Ikenberry, D., J. Lakonishok, and T. Vermaelen (1995), ‘Market Underreaction to Open Market Share Repurchases’, Journal of Financial Economics, Vol. 39, pp. 18120
  •  Jensen, M. C. (1986), ‘Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers’, American Economic Review, Vol. 76, pp. 323-329.
  •  Kahle, K.M. (2002, ‘When a Buyback isn’t a Buyback: Open Market Repurchases and Employee Options’, Journal Of Financial Economics, Vol. 63, pp. 235-261.
  • Lakonishok, J., A. Shleifer, and R. Vishny, R.W. (1994), ‘Contrarian Investment, Extrapolation, and Risk.’, Journal of Finance, Vol. 49, pp. 1541-1578.
  • Li, W. and E. Lie (2006), ‘Dividend Changes and Catering Incentives’, Journal of
  • Financial Economics, Vol. 80, pp. 293-308. Miller, M. And K. Rock (1985), ‘Dividend Policy Under Asymmetric Information’, Journal of Finance, Vol. 40 (September), pp. 1031-1051.
  • Ng, J., F. Vasvari, and R. Wittenberg-Moerman, R. (2010), ‘The Participants in the TARP Capital Purchase Program: Failing or Healthy Banks?’ Chicago Booth Research Paper No. 20-10.
  •  Nissam, D. and A. Ziv (2001), ‘Dividend Changes and Future Profitability’, Journal of Finance, Vol. 56, pp. 2111-2133.
  •  Ofer, A. And A. Thakor (1987), ‘A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends’, Journal of Finance, Vol. 42 (June), pp. 365-394.
  •  Skinner, D. (2008), ‘The Evolving Relation Between Earnings, Dividends, and Stock Repurchases.’, Journal of Financial Economics, Vol. 87, pp. 582-609
  •  Vafeas, N. (1997), ‘Determinants of The Choice Between Alternative Share Repurchase Methods’, Journal of Accounting, Auditing and Finance, Vol. 12, pp. 1011
  •  Vermaelen, T. (1981), ‘Common Stock Repurchases and Market Signaling: An Empirical Study’, Journal of Financial Economics, Vol. 9, pp. 139-183.
  •  Vermaelen, T. (1984), ‘Repurchase Tender Offers, Signaling and Managerial Incentives’, Journal of Financial and Quantitative Analysis, Vol. 19, pp. 163-181.
  •  Vermaelen, T. (2005), ‘Share Repurchases, Foundations and Trends’, in Finance, Vol. 1, pp. 171-268 (Hanover, MA, Now Publishers).
  •  Veronesi P. and L. Zingales (2010), ‘Paulson’s Gift’, Journal of Financial Economics, Vol. 97, pp. 339-368.
  • Exhibit 1 – Sample Firms 1 Accredited Home Lenders 59 JP Morgan Chase & Co. 2 Alabama National Bancorporation 60 Keycorp 3 Amcore Financial Inc. 61 Lehman Brothers Holding 4 Associated Banc-Corp 62 M&T Bank Corp 5 Astoria Financial Corp. 63 MAF Bancorp Inc. 6 Bancorpsouth Inc. 64 Marshall & Ilsley Corp. 7 Bank of America Corp 65 MB Financial Inc. 8 Bank of Hawaii Corp. 66 Mercantile Bankshares Corp. 9 Bank of New York Mellon 67 Merrill Lynch & Co. Inc. 10 Bankatlantic Bancorp 68 Morgan Stanley 11 Bankunited Financial Corp. 69 National City Corp. 12 BB&T Corp. 70 National Pen Bancshare 13 Bear Stearns Companies 71 NBT Bancorp Inc. 14 BFC Financial Corp. 72 New York Community Bancorp 15 BOK Financial 73 Newalliance Bancshares 16 Boston Private Financial Holdings 74 Northern Trust Corp. 17 Capitol Federal Financial 75 Northwest Bancorp Inc. 18 Cathay General Bancorp 76 Old National Bancorp 19 Central Pacific Financial Corp. 77 Pacific Capital Bancorp. 20 Chittenden Corp. 78 Pacwest Bancorp 21 Citigroup Inc. 79 Park National Corp. 22 Citizens Republic Bancorporation 80 PNC Financial Services Group 23 City National Corp 81 Popular Inc. 24 Colonial Bancgroup 82 Provident Bankshares Co. 25 Comerica Inc. 83 Provident Financial Services Inc. 26 Commerce Bancorp Inc. 84 Regions Financial Corp. 27 Compass Bancshares Inc. 85 Signature Bank (NY)\ 28 Corus Bankshares Inc. 86 SKY Financial Group Inc. 29 Countrywide Financial Corp. 87 South Financial Group Inc. 30 Cullen/Frost Bankers Inc. 88 Sovereign Bancorp Inc. 31 CVB Financial Corp. 89 Sterling Financial Corp. 32 Delta Financial Corp. 90 Suntrust Banks Inc. 33 Downey Financial Corp. 91 Susquehanna Bancshares 34 East West Bancorp Inc. 92 SVB Financial Group 35 Fannie Mae 93 Synovus Financial Corp. 36 First Citizens Bancshares 94 TCF Financial Corp. 37 First Commonwealth Financial Corp. 95 Trustmark Corp. 38 First Horizon National 96 U.S. Bancorp 39 First Midwest Bancorp. Inc. 97 UCBH Holdings Inc. 40 First Niagara Financial 98 UMB Financial corp. 41 Firstfed Financial Corp. 99 Umpqua Holdings Corp. 42 Firstmerit Corp 100 UnionBanCal Corp. 43 Fifth Third Bancorp 101 United Bankshares Inc. 44 Flagstar Bancorp Inc. 102 United Community Banks 45 FNB Corp. 103 Valley National Bancorp 46 Franklin Bank Corp. 104 Wachovia Corp. 47 Fremont General Corp. 105 Washington Federal Inc. 48 Fulton Financial Corp. 106 Washington Mutual Inc. 49 Goldman Sachs Group Inc. 107 Webster Financial Corp. 50 Greater Bay Bancorp 108 Wells Fargo & Co. 51 Hancock Holding Co. 109 Westamerica Bancorporation 52 Hudson City Bancorp Inc. 110 Whitney Holding Corp. 53 Huntington Bancshares 111 Wilmington Trust Corp 54 Indymac Bancorp Inc. 112 Wintrust Financial Corp. 55 International Bancshares Corp. 113 Zions Bancorporation 56 Investors Bancorp Inc. 57 Investors Financial Services 58 Irwin Financial Corp. Large firms indicated in bold print. Table 1 - Descriptive statistics of sample for selection year 2006
  • All Firms Large Firms Other Firm N N N Assets Mean 113 120,631 28 444,643 *** 85 13,898 Median 12,891 191,074 *** 9,828 MVE Mean 113 16,461 28 59,112 *** 85 2,412 Medium 2,151 28,532 *** 1,709 Tier 1 Ratio Mean 101 933 20 544 *** 81 276 Median 770 515 *** 900 TCE Ratio Mean 113 340 28 974 *** 85 790 Median 311 830 *** 480 Return on TCE Mean 113 0.196 28 0.248 85 0.179 Median 0.196 0.268 *** 0.173 Market to Book Mean 113 992 28 075 85 965 Median 912 004 855 Assets is the book value of assets measured as of the end of 2006 (millions); MVE is the market value of common stock outstanding, measured as of the end of the fiscal year 2006 (millions); Tier 1 Ratio is the tier 1 capital ratio calculated according to FDIC and OTC thrift rules and reported during the fourth quarter of fiscal 2006 (percent); TCE Ratio is calculated as tangible common equity divided by tangible assets as of the end of fiscal 2006 (percent); Return on TCE is fiscal 2006 net income divided by average common tangible equity; Market to Book is the ratio of the market value of common equity divided by the book value of common equity. Large Firms are defined as having a fiscal 2006 market value of equity of at least the 85th percentile of the NYSE while Other Firms have a fiscal 2006 market value of equity of less than then 85th percentile of the NYSE. *** and ** indicate a 0.01 and 0.05 difference respectively between the large firms and other firms using a two sample mean test and Wilcoxon sum rank tests of the medians.
  • Table 2: Descriptive Statistics of firm payouts 2004 - 2007
  • Panel A - All Firms N $ DIV $ RP % RP RP / TCE DIV / NI PO / NI % Change CSOS 2004 - Mean 112 37 31 0.0172 0.0351 0.3952 0.6700 0.0643 - Median 0 8 0.0091 0.0273 0.4150 0.5859 0.0119 2005 - Mean 112 49 51 0.0220 0.0649 0.4284 0519 0.0181 - Median 3 9 0.0114 0.0328 0.4108 0.6481 0.0033 2006 - Mean 113 47 61 0.0242 0.0732 0.3960 0.7171 0.0450 - Median 0 0 0.0140 0.0387 0.4315 0.7080 0.0064 2007 - Mean 102 57 68 0.0360 0.0941 0.4477 0092 0.0125 - Median 5 2 0.0315 0.0848 0.4597 0.9004 -0.0090
  • Panel B - Large Firms N $ DIV $ RP % RP RP / TCE DIV / NI PO / NI % Change CSOS 2004 - Mean 31 1,22 *** 1,09 *** 0.0303 *** 0.1022 ** 0.4104 0.8234 * 0.0853 - Median 50 *** 58 *** 0.0242 *** 0.0794 ** 0.4271 0.7786 *** 0.0156 2005 - Mean 30 1,40 *** 2,001 *** 0.0405 *** 0.1208 *** 0.4136 0.9324 -0.0017 ** - Median 600 *** 55 *** 0.0330 *** 0.1092 *** 0.4636 0.9412 *** -0.0100 ** 2006 - Mean 28 1,75 *** 2,67 *** 0.0453 *** 0.1457 *** 0.4094 0.9648 *** 0.0260 - Median 88 *** 92 *** 0.0389 *** 0.1238 *** 0.4562 0.9374 *** -0.0077 ** 2007 - Mean 29 1,88 *** 2,203 *** 0.0453 * 0.1245 0.4487 0.9453 0.0187 - Median 90 *** 1,03 *** 0.0414 ** 0.1343 ** 0.4663 0.8994 -0.0028
  • Panel C – Other Firms N $ DIV $ RP % RP RP / TCE DIV / NI PO / NI CSOS 2004 - Mean 80 5 7 0.0121 0.0095 0.3894 0.6105 0.0561 - Median 8 6 0.0043 0.0065 0.4135 0.4879 0.0118 2005 - Mean 82 9 3 0.0153 0.0444 0.4338 0957 0.0253 - Median 2 1 0.0065 0.0193 0.4083 0.5355 0.0056 2006 - Mean 85 1 5 0.0171 0.0493 0.3916 0.6356 0.0513 - Median 5 4 0.0066 0.0189 0.4218 0.5791 0.0096 2007 - Mean 73 0 3 0.0324 0.0824 0.4473 0347 0.0100 - Median 4 0 0.0300 0.0746 0.4567 0.9013 -0.0106
  • $ DIV is common dividends paid during the year (millions); $RP is the total value of share repurchases and shares accepted in lieu of employee stock exercise prices and other tax withholdings for employee stock compensation redemptions (millions); % RP is the number of shares repurchased during the year to common shares outstanding at the end of the prior year; RP / TCE is the dollar amount of shares repurchased to tangible common equity measured at the end of the prior fiscal year; DIV / NI is common dividends t divided by income available to common shareholders at t-1; PO / NI is total payouts to common shareholders (dividends plus share repurchases) divided by net income available to common shareholders at t-1 ; is net income divided by average assets. % Change CSOS is the percentage reduction in common shares outstanding between t-1 and t. A firm is considered a large firm if its market value of equity at the end of the prior year is at least in the 85 percentile of the NYSE. . ***, **, and * indicate a 0.01, 0.05, and 0.10 difference respectively between the large firms and other firms using a two sample means test and Wilcoxon sum rank tests of the medians.
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Authors

Monica Banyi This is me

Susan Porter This is me

Susan Williams This is me

Publication Date September 1, 2014
Published in Issue Year 2014 Volume: 3 Issue: 3

Cite

APA Banyi, M., Porter, S., & Williams, S. (2014). Capital Distributions in the Banking Industry. Journal of Business Economics and Finance, 3(3), 371-397.

Journal of Business, Economics and Finance (JBEF) is a scientific, academic, double blind peer-reviewed, quarterly and open-access journal. The publication language is English. The journal publishes four issues a year. The issuing months are March, June, September and December. The journal aims to provide a research source for all practitioners, policy makers and researchers working in the areas of business, economics and finance. The Editor of JBEF invites all manuscripts that that cover theoretical and/or applied researches on topics related to the interest areas of the Journal. JBEF charges no submission or publication fee.



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