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Mutual holding companies: Evidence of conflicts of interest through disparate dividends
Affiliation:1. Kelley School of Business, Indiana University, 801 West Michigan Street, Indianapolis, IN 46202-5151, USA;2. Indiana University Kokomo, 2300 South Washington Street, Kokomo, IN 46904, USA;1. Chemical Optosensors & Applied Photochemistry Group (GSOLFA), Dept. of Analytical Chemistry, Faculty of Chemistry, Universidad Complutense de Madrid, E-28040 Madrid, Spain;2. Enzyme Engineering Group, Dept. of Biocatalysis, Institute of Catalysis and Petroleochemistry-CSIC, E-28049 Cantoblanco, Madrid, Spain;3. Nanobiotechnology for Diagnostics Group, CIBER of Bioengenieering, Biomaterials and Nanomedicine, IQAC-CSIC, E-08034 Barcelona, Spain;4. Sustainable Energy and Chemistry Group, Dept. of Structure and Reactivity, Institute of Catalysis and Petroleochemistry–CSIC, E-28049 Cantoblanco, Madrid, Spain;1. College of Business and Economics, Boise State University, 1910 University Drive, Boise, ID 83725-1610, United States;2. Department of Economics and Finance, University of Dayton, Miriam Hall 502, 300 College Park, Dayton, OH 45469, United States;1. Dr Shroff’s Charity Eye Hospital, Daryaganj, New Delhi 110002, India;2. TU Teaching Hospital, Kathmandu, Nepal;1. Agricultural & Applied Economics Department, University of Georgia, United States;2. Department of Agricultural and Consumer Economics, University of Illinois at the Urbana-Champaign, United States
Abstract:The mutual holding company (MHC) structure establishes a dual-class stock that creates a unique opportunity to transfer wealth from thrift depositor–owners to new minority shareholders through the disparate payment of dividends. We show that MHCs are priced higher than comparable non-MHCs and dividend policy is a significant component of this valuation. We also show that MHC thrifts pay significantly higher dividends than non-MHC thrifts and that an Office of Thrift Supervision (OTS) ruling reducing the potential for disparate dividends between the two classes of shareholders resulted in lower dividends. These results have policy implications of special significance given that the OTS reversed its position in 2000 and because of the current controversy over the use of the MHC structure in the financial service industry.
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