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

Mohammad Sami Ali


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 Waldtest 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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DOI: https://doi.org/10.5430/ijfr.v11n4p96

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This work is licensed under a Creative Commons Attribution 4.0 International License.

This journal is licensed under a Creative Commons Attribution 4.0 License.

International Journal of Financial Research
ISSN 1923-4023(Print)ISSN 1923-4031(Online)


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