Ross N. Dickens

The effects of tax and regulatory changes on commercial bank dividend policy

Abstract The literature concerning the Tax Reform Act of 1986 (TRA) is extensive, but generally does not consider dividend policy changes related to TRA’s passage. One exception is Casey et al., but that work omits banking. An examination of banks is especially apt given TRA’s changes in tax rates and municipal bond categorization. Results show bank dividend policy to be different from other industries, as banks show no relation to past growth rates, beta, or an insider ownership as Rozeff’s model holds. The results support the idea that the lower the taxes, the higher the payout which is contrary to the dividend irrelevancy argument. However, the results are not robust in tests using data from a later period meant to more closely examine changing capitalization requirements’ impact on dividend policy.

Interactions between mortgage and other capital markets in the USA: has financial deregulation made a difference?

The degree of short- and long-term interreactions between the mortgage and other capital markets in the USA is explored. The study also investigates whether financial market deregulation impacts the underlying interrelations. Theory alone provides little practical guidance on both issues. The empirical results are derived from monthly data using multivariate models and numerous sensitivity tests. The results consistently support regulators’ common posture that the mortgage market is essentially localized over the long term. Nevertheless, the results do show that the mortgage market exhibits pronounced short-term interrelations with other capital markets, especially the long-term Treasury security market. Compelling evidence is also found that financial market deregulation had little impact on the degree of markets’ interrelations.

The oil industry's response to new avenues in futures trading

We examine the Cumulative Abnormal Returns (CARs) of petroleum, airline and investment banking firms to the announcement and initiation of trading for two new oil-related assets in 2006: West Texas Intermediate crude futures contracts traded via the Intercontinental Exchange and the American Stock Exchanges (AMEX) US Oil exchange traded fund (USO). In general, we find few significant changes, but the changes we find are marginally positive reactions related to the two new contracts. We also find evidence that firms which utilize derivatives benefit less than firms which do not. However, firms which trade derivatives (nonhedgers) have greater returns than nontraders (hedgers).

The Dollar and U.S. Inflation: Some Evidence from a Vecm Process

Large fluctuations in the dollar value in recent years rekindled fears of increased U.S. price instability. With monthly data, we employ the cointegration and error-correction modeling technique to examine the nature of the interrelationship between the dollar and U.S. prices in a multivariate setting. The empirical results reveal strong and lasting effects of changes in the dollar exchange rate on U.S. inflation. The results also indicate that money supply exerts a potent and quick impact upon U.S. prices. Therefore, it seems that the Federal Reserve has shouldered much of the responsibility with respect to U.S. price stability in the face of the dramatic changes in the dollar value in recent years.