Cross-sectional differences in the profits, returns and risk of firms initiating dividends

Purpose – The purpose of this paper is to examine the Dickens et al. model of bank holding company dividend policy. They identified five explanatory factors in a sample of bank holding companies (BHCs). Banking companies typically pay larger dividends and more often than industrial firms. Investors often look at the dividends as being important return variables. Design/methodology/approach – In this study, a sample of 99 firms with 2006 data from governmental reports and Yahoo is used in regression equations to test the relationship of the five identified variables with dividend yields. The analysis is extended to investigate non-linearities between dividend yield and insider ownership. Findings – The paper finds that the original model is robust, but not all variables keep their significance. Insider holdings have a non-linear relationship with dividend yields. Practical implications – The significant factors affecting bank dividend policy help dividend seeking investors find BHCs that return higher dividend yields. Originality/value – This paper reveals a non-linear link between insider holdings and dividend yields among BHCs.