Mutual strongHolding Companiesstrong Evidence of Conflicts of Interest.pdf

Mutual Holding Companies: Evidence of Conflicts of Interest through Disparate Dividends Kenneth A. Carow Indiana University Kelley School of Business 801 West Michigan Street Indianapolis, IN 46202 kcarow@iupui.edu 317-274-2783 Steven R. Cox Indiana University Kokomo 2300 South Washington Street Kokomo, IN 46904 scox@iuk.edu 765-455-9314 Dianne M. Roden Indiana University Kokomo 2300 South Washington Street Kokomo, IN 46904 droden@iuk.edu 765-455-9470 Comments are welcome. April 2003 1 Mutual Holding Companies: Evidence of Conflicts of Interest through Disparate Dividends 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