Dividend policy in Norwegian banking before 1914

Lars Fredrik Øksendal

Financial History Review, 2011, vol. 18, issue 2, 217-241

Abstract: This article discusses the dividend strategy adopted by Norwegian commercial banks before 1914. Based on a unique data set covering all banks in the period 1882– 1913 as well as six other institutions for the pre-1882 period, I identify the existence of a strong bias towards the payment of high and stable dividends to shareholders. The origins of such bias lie in the specific institutional set-up of commercial banking, the expectations of shareholders and the absence of developed securities markets. Combined with a strong preference for high gearing, this feature contributed to increase the fragility of the Norwegian banking system.

Date: 2011
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