Bank Dividend Policy and the European Debt Crisis: Is Sovereign Credit Risk of Relevance?

Tobias Basse, Thomas Bürkle, Frederik Kunze and Christoph Wegener

Chapter 16 in Handbook of Global Financial Markets:Transformations, Dependence, and Risk Spillovers, 2019, pp 401-410 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter examines the dividend policy of European banks. The empirical evidence presented here suggests that financial institutions in the Eurozone react to stress in international financial markets by reducing or omitting dividend payouts to strengthen their capital position. Additionally, a negative reaction of dividend payouts of European banks to an increase of the yield differential between German and Spanish bonds seems to exist. However, this response of dividends to sovereign credit risk in the Eurozone is not statistically significant. The financial crisis starting in 2007 does not seem to materially change the relationships among the variables examined here.

Keywords: Market Integration; Risk Management; Risk Assessment; Financial Uncertainty; Volatility; Financial Markets; Financial Development; Country Risks; Sovereign Debt Markets (search for similar items in EconPapers)
JEL-codes: F37 (search for similar items in EconPapers)
Date: 2019
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