What makes banks adjust dividend payouts?

Marco Belloni, Maciej Grodzicki and Mariusz Jarmuzek

Macroprudential Bulletin, 2021, vol. 13

Abstract: This contribution reviews historical drivers of bank dividend payouts in the euro area. Economic literature presents three main reasons for adjustments to dividend payouts: asymmetric information between shareholders and management, the presence of agency costs, and regulatory constraints. Using a panel data approach, the article finds evidence supporting all three hypotheses. Banks lower dividends after facing a decline in profits and capital, but counterfactual simulations show that this adjustment could be small. Regulatory restrictions may therefore be warranted in the event of large expected losses or heavy uncertainty. JEL Classification: G21, G35

Keywords: bank dividends; financial regulation; payout policies (search for similar items in EconPapers)
Date: 2021-06
Note: 1486549
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