Does the dividend policy signal quality? Investigation on the bank funding costs, and market discipline

Dung Tran, Trung duc Nguyen () and Chi huu Lu ()
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Trung duc Nguyen: Banking University Ho Chi Minh City
Chi huu Lu: Banking University Ho Chi Minh City

Economics Bulletin, 2021, vol. 41, issue 3, 2029-2040

Abstract: Using a large sample of US banks, this study provides consistent evidence on lower funding costs for banks that pay more dividends. This cost-decreasing effect of dividend policy is interestingly more pronounced for large banks and during the late stage of the financial crisis. These findings suggest the bright side of dividend policy as a tool to signal the quality of bank financial health consistent with Tripathy, Wu, and Zheng (2021). We believe our study is of interest to regulators and policymakers who are concerns of strengthening the market discipline and stability in the banking system.

Keywords: Dividends; Funding costs; Banks; Signaling; Market discipline (search for similar items in EconPapers)
JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2021-09-18
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Citations: View citations in EconPapers (2)

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