The Interplay between Dividends and Leverage inside Commercial Banks

Silvia Bressan

International Journal of Financial Research, 2017, vol. 8, issue 2, 7-39

Abstract: The paper analyzes the dividends paid by a large sample of commercial banks in the United States during 2006-2011. The most interesting findings arise after the end of 2008. Our measures for the probability of paying dividends and for the dividend payout ratio are positively related to the banks¡ä non-deposit leverage. Conversely, banks¡ä dividends correlate negatively to deposit leverage. We argue that during the crisis of 2007-2009 the liquidity needs of banks resorted more to deposits, than to non-deposit debt. This, in turn, had an impact on banks¡ä dividend policies, to the extent that firms which could raise deposits preferred to preserve their financial stability, and did not pay huge dividends.

Keywords: banks; dividends; leverage (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:8:y:2017:i:2:p:7-39

DOI: 10.5430/ijfr.v8n2p7

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