Khamis Hamed Al-Yahyaee

Dividend stability in a unique environment

Purpose - This paper aims to examine the stability of dividend policy using a unique data set. Design/methodology/approach - The paper is based on the Lintner model that is used to test the dividend smoothing behavior. The specific econometric method used for panel data is Tobit regression. Findings - The evidence shows that Omani firms adopt a policy of smoothing dividends. This stability of dividends does not support the predictions suggested by the high bank leverage, absence of taxes, and the variability of dividend payments in Oman. Research limitations/implications - This study highlights the need for further research in order to examine whether these results have any effect on dividend initiations and omissions in Oman. Practical implications - The findings of this study show that there are differences in dividend policies between the Omani companies and those in developed markets. Potential investors in the Omani market should be aware about these differences in making their investment decisions. Originality/value - This paper examines stability of dividend policy in a unique environment where firms distribute almost 100 percent of their profits in dividends, firms are highly levered mainly through bank loans, there are no taxes on dividends and capital gains, and there is variability in cash dividend payments. These factors suggest a diminished role of dividend stability in Oman. It is an empirical issue to examine whether this is indeed true. The authors are not aware of any other study on dividend stability using data with these unique factors.

Dividend smoothing when firms distribute most of their earnings as dividends

Due to its distinctive institutional background, Oman offers a valuable opportunity to investigate the stability of the dividend policy. In Oman, (1) there are no taxes on dividends, (2) firms are highly levered mainly through bank loans, (3) there is a high concentration of stock ownership and (4) there is variability in cash dividend payments. These factors suggest a diminished role of dividend smoothing in Oman. Our results show that Omani financial firms have erratic dividend policies. These results are inconsistent with the predictions suggested by the relatively weak corporate governance, government ownership and dividend signalling.

Frequency and Motives for Stock Dividends in a Unique Environment

We investigate the possible differences in the information content of stock dividends between firms that distribute stock dividends frequently (frequent distributors) and firms that distribute stock dividends infrequently (infrequent distributors) using a unique data set from Oman where the market microstructure frictions are either absent or limited. We find that infrequent stock dividend distributors have higher postdistribution operating performance relative to frequent distributors. We also find that the illiquidity measure is significantly related to the announcement effect only for frequent stock dividend distributors, whereas short�?term performance is significantly related to the announcement effect only for infrequent distributors. Our findings indicate that infrequent stock dividends are used mainly to convey favorable private information about the firms’ future prospects, and frequent stock dividends are used to reduce stock price to an optimal trading range in order to improve trading liquidity.

Has co-movement dynamics in emerging stock markets changed after global financial crisis? New evidence from wavelet analysis

ABSTRACT In this article, we revisit the issue of contagion, interdependence and changes in correlation structure after the Global Financial Crisis (GFC) of 2008 between developed and emerging markets in a time-frequency domain using a wavelet-based approach for the period spanning over 1 January 1999 to 8 November 2016. We report evidences of: (a) weaker contagion for Latin American emerging markets during GFC, (b) a strong contagion effect for emerging markets in Europe and the Middle East and (c) a fall in long-run co-movements after GFC, which means by investing in emerging markets, the diversification benefits can be derived in the long run. We report evidence of coexistence of contagion and permanent change in correlation structure.

Risk Committees and Implied Cost of Equity Capital

We investigate the association between the existence of risk committee and implied cost of equity capital in a unique institutional setting where the formation of the board risk committee as part of the risk governance mechanism is not mandatory in the Gulf Cooperation Council (GCC) financial institutions. Using data from the six GCC countries, we find that implied cost of equity capital is negatively associated with the existence of board risk committee. These findings indicate that GCC financial firms with better risk governance practices at board level have lower implied cost of equity capital. We contribute to the extant literature on‐board risk governance in emerging market context.

Why Do Stock Prices Drop by Less than the Amount of the Dividend? Evidence from a Unique Environment

We investigate the effect of a lack of an automated limit order adjustment mechanism on ex-dividend day stock price behavior in a unique environment in which there are no taxes on dividends and capital gains. The absence of taxes in Oman allows us to test the effect of the lack of a limit order adjustment mechanism in the absence of confounding tax effects that are present in other markets. We find that overnight drop in the ask price is smaller than the overnight drop in the bid price. In addition, we find that average price drops are smaller than the dividend amount for all dividend sizes. We also find no evidence of a sawtooth-shaped relationship between the dividend amount and the ex-dividend day price drop. These results are generally consistent with a lack of an automated limit order adjustment mechanism.

Capital structure and stock returns: evidence from an emerging market with unique financing arrangements

We investigate capital structure dynamics in a unique financing environment where (1) we avoid the complex tax environments faced by previous studies and where (2) firms rely primarily on bank loans rather than the public debt market. Consistent with recent empirical evidence, we find that stock returns are a first-order determinant of capital structure. Firms show some tendency to rebalance towards their target capital structure. However, the impact of stock returns dominates the effects of rebalancing. We also find that firms stock returns induce some corporate issuing activity, and managers use issuing activity to counteract some of the mechanistic effects of stock returns.

Market risk disclosures, corporate governance structure and political connections: evidence from GCC firms

ABSTRACT This paper investigates the joint effect of political connections, in the form of the royal family member on board, and corporate governance on the market risk disclosures of the Gulf Cooperation Council (GCC) financial firms from 2007 to 2011. Previous research suggest that politically connected firms reduce the level of transparency in the GCC. However, we find that better corporate governance improves transparency and can be used as an effective tool in curbing the potentially adverse impact of politically connected board members on firms’ transparency. Our results have important implications for policy makers and can be generalized to other emerging markets.

Security Returns During Ex-Dividend Period☆

Abstract This paper examines the security returns during ex-dividend period for firms listed on the Muscat Securities Market (MSM). We find stock dividends elicit a significant stock market response. In addition, the abnormal return seems not to be confined to the ex-day in Oman. In particular, the positive abnormal return extends for seven days after the stock dividend ex-day. We also find that larger firms in Oman prefer a higher trading range.

Market Microstructure and Ex-Dividend Day Pricing Anomaly: Evidence from a Unique Environment

This paper examines the effect of the reduction in tick size on ex-dividend day stock price behavior taking advantage of a unique data where there are no taxes on dividends and capital gains and the tick size is fixed for all traded securities. These data allow us to differentiate among competing ex-dividend day hypothesis in the absence of confounding tax effects present in other markets. We find that ex-day premiums increase and abnormal returns decrease as the tick size become smaller, which is in line with the market microstructure hypothesis. On the other hand, we do not find any significant increase in abnormal volume with the reduction in tick size. This finding is inconsistent with the pattern that should occur if transaction cost is the dominant factor causing the ex-day phenomenon.