Payouts and Future Bank Profitability: The Role of Capital Distribution Plans

Dimitris K. Chronopoulos, Edie Erman Che Johari, Anna L. Sobiech and John Wilson

Review of Corporate Finance, 2023, vol. 3, issue 3, 361-387

Abstract: We investigate the impact of a change in the regulatory oversight of bank capital distributions on the information content of payouts (dividends, share repurchases) regarding the future level and volatility of profitability of US Bank Holding Companies (BHCs). Using a differential regulatory treatment, which requires large BHCs to obtain prior regulatory approval before enacting payouts to shareholders, we find that an increase in regulatory oversight of bank capital distributions leads to an increase in the information content of dividends (but not share repurchases) with respect to the level (but not the volatility) of future bank profitability.

Keywords: Banks; bank regulation; capital; dividends; payouts; profitability; repurchases (search for similar items in EconPapers)
JEL-codes: G21 G35 G38 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlrcf:114.00000044

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