Article: The Relationship between Dividends and Equity Acquisition in Banking: Substitutes or Complements? Journal: Journal of Business and Management (JBM) 2002 Vol.8 No.1 pp.19 - 31 Abstract: This paper offers empirical evidence that dividend payments and external equity acquisitions of commercial banks are generally substitutes (negatively related). However, we observe complementarities (positive relationship) when banks are significantly undercapitalized. This is consistent with the existence of differential signaling incentives that vary with banks' financial condition. Such incentives are relevant to the implementation of the Federal Deposit Insurance Corporation Improvement Act of 1991. Inderscience Publishers - linking academia, business and industry through research

Title: The Relationship between Dividends and Equity Acquisition in Banking: Substitutes or Complements?

Authors: Drew Dahl; Michael F. Spivey

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: This paper offers empirical evidence that dividend payments and external equity acquisitions of commercial banks are generally substitutes (negatively related). However, we observe complementarities (positive relationship) when banks are significantly undercapitalized. This is consistent with the existence of differential signaling incentives that vary with banks' financial condition. Such incentives are relevant to the implementation of the Federal Deposit Insurance Corporation Improvement Act of 1991.

Keywords: Dividends; equity acquisition; commercial banks; substitutes; complements.

DOI: 10.1504/JBM.2002.141073

Journal of Business and Management, 2002 Vol.8 No.1, pp.19 - 31

Published online: 05 Sep 2024 *

Title: The Relationship between Dividends and Equity Acquisition in Banking: Substitutes or Complements?

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