Guest editorial

Citation

Casey, K.M. (2009), "Guest editorial", Managerial Finance, Vol. 35 No. 6. https://doi.org/10.1108/mf.2009.00935faa.001

Guest editorial

Article Type: Guest editorial From: Managerial Finance, Volume 35, Issue 6.

This is a special issue of Managerial Finance dedicated to the study of stock dividends. The dividend decision has always been a critical decision for managers, particularly in firms with investment opportunities. The question of “why do firms pay dividends?” has never been satisfactorily resolved in the literature in spite of hundreds of published studies on this topic. Dividends are also of interest from the investor's perspective. For many decades, stocks such as utilities and banks with high dividend yields were the favorites of “widows and orphans” funds where steady income was of paramount concern. Dividends are also important to many other investors because they provide some opportunity for growth which is not available with bonds. For these reasons there continues to be a tremendous amount of interest in dividends and thus the topic of this issue.

The first paper in this special issue is by Robert A. Weigand and H. Kent Baker. They summarize and synthesize the voluminous dividend work which has been published over the past several decades. They thoroughly explore the declining rate of dividend payouts in the USA over the past 25 years, identifying the variety of regulatory, economic and tax policy influences which have helped to bring about this change. This paper serves as a solid primer for anyone wanting to conduct dividend research.

Victor Puleo, Frank Smith and I incorporate a new corporate governance measure, the Corporate Governance Quotient, in the study of dividends in the highly regulated insurance industry. We find no evidence of a relationship between good corporate governance and dividend policy in the insurance industry, implying regulation may supplant the need for most corporate governance mechanisms and dividend distribution to provide information[1].

John Theis and Amitabh S. Dutta then examine the dividend paying behavior of bank holding companies, a group which traditionally has had high dividend payout ratios. They find a non-linear relationship between insider holdings and bank dividend yields.

Neil L. Fargher and Robert A. Weigand examined dividend initiators for the period 1964-2000. Their findings include low market-to-book (M/B) ratio stocks being associated with stronger positive price movements when they initiate dividends. They also find that high M/B ratio stocks have larger profits, cash levels and capital expenditures at the time of dividend initiation but that after just three years they resemble low M/B firms.

Finally, Apostolos Dasilas, Katerina Lyroudi and Demetrious Ginoglou conduct an event study of dividend initiations in the Greek stock market. The study adds some interesting flavor as they explain policy and practice in Greek first. Then, their study finds the price response to dividend initiations is inversely associated with the information environment. Also, they find the volatility of stock returns is higher in the low information environment group of firms than in the high information group.

I believe the papers in this special issue of Managerial Finance shed light on a variety of issues surrounding dividends. It should be of interest to researchers and of use to practitioners in the field when making managerial decisions in regards to a corporation's dividend policy. I enjoyed working with my fellow researchers in putting together this special issue of Managerial Finance and I want to thank the Editor-in-Chief, Don T. Johnson, and the publisher, Emerald Group, for allowing me to put together this issue. I also want to verify that every paper in this special issue went through the traditional double-blind, peer-review process.

Best regards,

K. Michael CaseyMcCastlain Professor of Finance, Chair, Department of Economics, Finance, Insurance and Risk Management, University of Central Arkansas

Note

1. Since I was editing this special issue, I submitted this paper to another person to serve as editor on this paper, and it was sent through the full double-blind, peer-review process, just as were all the other papers in this special issue.