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- Banks are defined as having low (high) regulatory capital ratios if they are in the bottom (top) tercile of banks based on the risk-weighted capital ratio at the end of 2006. Panels C and D show abnormal dividends for large and small banks.
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- Banks are defined as small (large) if they are in the bottom (top) tercile of total assets at the end of 2006. % of one standard deviation is the average residual divided by the standard deviation of the corresponding variable (shown in Table 1, Panel B). *, **, and *** indicate that the estimate is significantly different from 0 at the 10%, 5%, and 1% level.
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- The bottom part of Panel B shows a break-down of the dividend behavior in year (t+1) for banks that issue (do not issue) equity in year t. The data on equity issuance come from SNL and are available for 1999-2012.
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- The dividend changes in columns 1, 3, 5, and 7 are measured in 2007; and those in columns 2, 4, 6, and 8 are measured in 2008. Control variables are defined in Table 1. Control variables are lagged one year with respect to dividend growth, i.e. are measured in year t-1. Models are estimated with a constant, which is not reported in the table. Underneath each coefficient we show t-statistics that are based on heteroskedascity-robust standard errors. *, **, and *** indicate that the coefficient is statistically significant at the 10%, 5% and 1% level.
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- Then, we compare the actual payout of a bank during 2007 and 2008 to the out-of-sample prediction from the models in Table 3, based on the coefficients estimated for 1995-2006 for dividends and 2000-2006 for total payout. % Equity issuance is the number of common shares issued in a given year divided by the total number of shares outstanding prior to the issue. Issuance dummy equals 1 if the bank issue any equity in a given year. Panel A shows regressions of abnormal dividend measures, and Panel B shows regressions of abnormal total payout measures. Models are estimated with a constant, which is not reported in the table. Underneath each coefficient we show t-statistics that are based on heteroskedascity-robust standard errors. *, **, and *** indicate that the coefficient is statistically significant at the 10%, 5%, and 1% level.
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- Then, we compare the actual payout of a bank during 2007 and 2008 to the out-of-sample prediction from the models in Table 3, based on the coefficients estimated for 1995-2006 for dividends and 2000-2006 for total payout. Panels A and B show abnormal dividends for banks with low and high regulatory capital ratios.
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- To compute CARs, we use a Carhart (1997) four-factor model, estimating model parameters for the period (-260,-20) relative to the announcement date. We test whether the CARs are significantly different from zero using the test statistic of the standardized cross-sectional Z-test of Boehmer, Musumeci, and Poulsen (1991). *, **, and *** indicate that the CAR is significantly different from zero at the 10%, 5%, and 1% level.
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- To compute CARs, we use a Carhart (1997) four-factor model, estimating model parameters for the period (-260,-20) relative to the announcement date. We test whether the CARs are significantly different from zero using the test statistic of the standardized cross-sectional Z-test of Boehmer, Musumeci, and Poulsen (1991). *, **, and *** indicate that the CAR is significantly different from zero at the 10%, 5%, and 1% level.
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- Year CAR(0,3) N CAR(0,3) N CAR(0,3) N Full sample-0.28*** 568 0.44*** 3,137 1.28*** 665 1995 – 2006 0.06 298 0.49*** 2,419 1.43*** 523 2007 – 2008 0.33 72 0.37** 348 0.62* 89 2009 – 2012-1.02*** 198 0.25 370 0.91 53 Dividend decreases Dividend increases Repurchases 52 Table 8: Dividend growth and future performance OLS regressions of future stock returns and future operating performance on dividend growth. The dependent variable in columns 1 and 2 (columns 3 and 4) is the stock return (ROA) in period t+1. Panel A uses yearly observations and Panel B uses quarterly observations. The independent variables include dividend growth in year (quarter) t, period dummies, and control variables. Control variables are defined in Table 1. Control variables are lagged one year (quarter) with respect to dividend growth, i.e. are measured in year (quarter) t-1. Models are estimated with a constant, which is not reported in the table. The regressions are estimated for the period 1996-2012.
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